Brent crude briefly fell to around $90 a barrel on Tuesday for the first time since August. Traders are betting on a peace deal, which has not come yet.
Oil’s slide is deepening.
Brent crude briefly fell below $90 a barrel on Tuesday, its lowest level since late August, before recovering to settle around $91.68. It traded near $92 early on Wednesday. On 2 November, it was above $110, a fall of roughly $20 in nine days. US crude traded around $86.
The slide gathered pace on Monday, when Brent fell almost 6% after President Donald Trump met Qatar’s prime minister at the White House and said he would not launch new military strikes on Iran for now. Iran is reviewing proposals from Qatar, the chief mediator, aimed at resolving differences over its nuclear programme. .
Is the trade getting ahead of itself
As there is no deal yet, the road ahead remains blurred.
Iran has set conditions for reopening the Strait of Hormuz, including the lifting of US sanctions, the release of frozen funds and an end to the US naval blockade of its ports. US Secretary of State Marco Rubio has called some Iranian demands outrageous. Attacks on ships near Hormuz have continued throughout the talks.
Crude oil traffic through the strait remains far below normal. Before the war, about 85 vessels passed through each day. In recent weeks, the number has been in single digits.
The market has been here before. In March and October, oil fell sharply on hopes of a settlement, only to rebound above $100 when talks stalled. OPEC’s monthly oil market report, due on Wednesday, will offer its view on supply and demand.
What sub-$92 oil means for India
India imports about 85% of its crude oil, so a $20 fall in the price is a major relief for the economy. Indian markets reopen on Wednesday, and oil-sensitive sectors are likely to be in focus.
Inflation and interest rates. Cheaper oil lowers fuel and transport costs, which feed into the prices of almost everything. India’s October inflation data, due on Thursday, is expected to be high, partly because of a low base last year. A sustained fall in oil would help the RBI avoid another rate increase in December, good news for anyone with a floating-rate home or car loan.
The rupee. India pays for oil in dollars, so lower prices reduce demand for dollars and support the rupee. But hotter-than-expected US inflation data on Tuesday strengthened the dollar, which could limit the rupee’s gains.
Petrol and diesel. State-run fuel retailers have kept pump prices steady while crude swung. If prices stay low, their margins improve, and the government gains room to cut pump prices.
Oil companies. For Indian Oil, Bharat Petroleum and Hindustan Petroleum, lower crude is positive over time, though sharp falls can bring short-term losses on oil already bought at higher prices. For ONGC, which produces crude, lower prices mean lower earnings per barrel.
For now, the oil market is pricing in a peace that diplomats are still building. If talks deliver, oil could fall further. If they stall, the past nine days’ slide could reverse just as quickly.
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