Crude oil prices are anticipated to stabilize as concerns over an all-out war in the Middle East subside. Tensions between Israel and Iran previously led to a 13% surge in Brent crude prices over the past week. As of October 7, Brent crude reached $79.4 per barrel, up from $70.2 just a week earlier.
The Indian government remains confident in its ability to manage potential disruptions to oil supply that may arise from escalating tensions. Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, stated, “Currently, there is more oil available globally than what is being consumed.” He reassured that even if some suppliers hold back availability, new market entrants would compensate for any shortfall. “In the short to medium term, I do not foresee any oil shortages; there is sufficient oil available, and we have multiple sourcing options,” he added.
India relies on imports for 88% of its crude oil needs from 39 countries, making it vulnerable to market fluctuations. Energy market analyst Narendra Taneja warned that significant concerns would arise only if tensions in the Gulf escalate further. He noted that if Israel attacks oil installations in Iran, it could provoke Iran to block the Strait of Hormuz, potentially leading to massive supply disruptions and skyrocketing prices.
If geopolitical tensions remain stable in the coming days, experts believe crude prices may soften. Analysts suggest that both Israel and Iran are likely to avoid an all-out war since neither side can afford the consequences. Ian Bremmer, President of the Eurasia Group, remarked that Israeli Prime Minister Benjamin Netanyahu is cautious about engaging in war with Hezbollah, as they are better equipped than Hamas. Bremmer concluded that the chances of an all-out war are low, which is why oil prices have remained steady since August.
Sara Vakhshouri, President of SVB Energy International, pointed out that the future trajectory of oil prices will depend on the extent of any damage and how much oil is removed from the market. Historically, when geopolitical impacts are manageable and not extensive, the market response tends to be muted.
Market data indicates a gradual cooling of tensions. According to FactSet, Brent crude prices are falling in the futures market, suggesting a slow return to stability over the next few months.
**Futures Prices for Brent Crude:**
– December: $79.05
– January: $78.41
– February: $77.84
– March: $77.41
– April: $77.08
– May: $76.77
A report from ANZ further calmed the market by indicating that drastic escalations with Iran are unlikely and highlighting sufficient supply buffers, particularly from OPEC, to manage potential disruptions in the Middle East.
In India, the average price of crude oil in August was $78.27 per barrel, down from $84.15 in July. Indian retail prices are based on this average basket, which has been on a downward trend since peaking at $89.44 per barrel in April.