Crude Slides Toward $70 as Iran Returns to the Oil Market, Lifting Hopes of Cheaper Fuel in India

Crude oil prices have dropped back to the levels seen before the US-Iran flare-up, opening the door to possible cuts in petrol and diesel prices at home.

There is welcome news for Indian buyers struggling with high fuel costs. Crude oil prices on the international market have fallen sharply and are now back to where they stood before tensions between the United States and Iran erupted. During the day's trade, Brent crude briefly slipped below $70 a barrel. It is currently changing hands at $73.28 a barrel, down 0.46 percent, while US crude has dropped to $69.95 a barrel.

This steep softening in crude could clear the way for cuts in petrol and diesel prices within the country. The big spike that oil prices saw in recent weeks because of the crisis in the Middle East has now almost completely faded away.

What Is Driving the Drop
The single biggest reason behind this slide is Iran's return to the global oil market. Following the understanding reached between the United States and Iran, large numbers of oil tankers are now passing safely through the Strait of Hormuz with their tracking systems switched on. As a result, the worldwide supply of oil appears to be moving back to normal.

Right now buyers are sitting pretty, because the availability of crude in the market has climbed far higher than expected. Refining companies and buyers are receiving a steady stream of fresh offers from major oil-exporting regions across the world, from the Middle East all the way to West Africa. With Iran's vast oil reserves entering the market, supply is expected to rise even further in the days ahead, which could push prices down still more.

Bearish Contango Shows Up in the Market
The impact of this slowdown is now clearly visible in the prompt spread of Brent crude. On Wednesday, this crucial oil-market indicator slipped technically into bearish contango for the first time since the Middle East conflict began.

Commodity experts say bearish contango simply means that supply of prompt oil currently outweighs demand for it. It is a technical signal that pressure on crude prices is likely to persist in the near future as well.

What this means for you
• Across India: Cheaper crude raises the chance of petrol and diesel price cuts in the coming days, which could lower travel and daily expenses for ordinary people.
• On your wallet: Lower diesel prices cut transport costs, which can in turn ease the prices of vegetables, groceries and other everyday goods.

Questions & Answers

1. What is the current price of Brent crude?
Brent crude is trading at $73.28 a barrel, down 0.46 percent, after briefly slipping below $70 during the day.

2. What is the price of US crude oil?
US crude oil has dropped and is trading at $69.95 a barrel.

3. What is the biggest reason for the fall in crude prices?
The main reason is Iran's return to the global oil market, which is boosting oil supply around the world.

4. What role does the Strait of Hormuz play here?
After the understanding between the US and Iran, large numbers of tankers are passing safely through the Strait of Hormuz with their tracking systems on, helping normalise supply.

5. Will this make petrol and diesel cheaper in India?
The sharp drop in crude has created a strong possibility of cuts in petrol and diesel prices in the domestic market.

6. What does bearish contango mean?
It means supply of prompt oil currently exceeds demand, a technical signal that pressure on prices is likely to continue.

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