Oil prices rose on Wednesday after US President Donald Trump denied reports that he was willing to ease sanctions on Iran, while Qatar pushed for peace talks between the two sides. The rise came a day after crude prices fell sharply on signs of improving oil supplies from the Middle East.
Brent crude was trading around USD 96 per barrel on Wednesday. The 10-day average of crude exports from the Middle East has recovered to 17.5 million barrels per day, around 98 per cent of the pre-war level of about 18 million barrels per day.
Zee Business Managing Editor Anil Singhvi said signs of dialogue between the United States and Iran have increased, with Qatar acting as an intermediary.
Iran-US talks gain focus
Singhvi said Iran is waiting for the US response to a proposal discussed through Qatar. Iranian Foreign Minister Abbas Araghchi has indicated that Qatar is acting as an intermediary in the discussions.
“Iran is waiting for the final response from America. This time, the wait is on the Iranian side,” Singhvi said.
He said efforts to end the US-Iran conflict appear to be gaining momentum, with discussions also covering the reopening of the Strait of Hormuz.
Singhvi said Iran’s willingness to engage in talks is an important development for the oil market. The Strait of Hormuz is a major route for global oil shipments, and any disruption can affect crude supplies and prices.
He said reports suggest that a substantial portion of crude flows through the strait has been restored. Some estimates put the recovery at around 80 per cent of earlier levels, while other estimates indicate flows of nearly 17.5 million barrels per day against about 18 million barrels per day before the conflict.
Saudi pipeline restarts oil flows
Singhvi said the restart of Saudi Arabia’s East-West pipeline has improved the global oil supply situation. “Saudi Arabia has restarted its East-West pipeline and around 3.5 million barrels per day of oil is flowing through it,” he said.
The pipeline provides Saudi Arabia with an alternative route for transporting crude and reduces the country’s dependence on the Strait of Hormuz for part of its exports.
The recovery in Middle East oil flows has eased concerns about a prolonged supply shortage. Singhvi said the movement of crude through the Strait of Hormuz remains the most important factor for the oil market.
“If oil is moving smoothly through Hormuz, there can be only two reasons. Either America is allowing it or Iran is allowing it,” he said.
Singhvi said the restoration of supply could also be one of the factors behind Iran’s greater willingness to negotiate.
US releases 40 million barrels from reserves
The United States has also announced plans to release up to 40 million barrels of crude from its Strategic Petroleum Reserve (SPR) as fuel prices remain elevated.
Singhvi said the release from US reserves, the restart of Saudi Arabia’s East-West pipeline and the improvement in oil flows through the Strait of Hormuz have changed the near-term supply outlook.
US industry data also showed that crude inventories increased by around 1 million barrels last week.
Singhvi said December crude futures were trading around USD 96 per barrel, while the November contract was around USD 103 before its expiry. This leaves a gap of about USD 7 between the two contracts.
“Normally, the next month’s crude should trade at a higher price. Prices trade lower when the market expects prices to remain lower in the next month,” Singhvi said.
The lower price of the December contract compared with the November contract indicates that the market is pricing in an improvement in supply conditions and lower crude prices in the coming month.
Dollar, US bond yields hit markets
Singhvi said the decline in US markets was largely linked to two factors rather than developments related to the US-Iran conflict. The dollar index rose to a two-month high and closed above 101. A stronger dollar can put pressure on commodities and currencies and can also affect equity markets.
The US 10-year Treasury yield also moved towards 5.25 per cent and reached a new high in nearly 19 years. It closed at around 5.24 per cent.
“Both these factors are negative, and US markets reacted to these triggers,” Singhvi said. He said most US stocks remained weak during the session, although some artificial intelligence-related stocks, including Nvidia, were exceptions.
Singhvi said the weakness in US markets was not his main concern for Indian equities. “The weakness in America does not worry me. I am looking at crude,” he said.
Why crude matters more for India
Singhvi said crude prices remain a bigger concern for India because the country imports a large share of its crude oil requirement. Brent crude remains on track for a third consecutive monthly gain despite the recent decline, mainly due to the prolonged US-Iran conflict and widespread supply disruptions.
For Indian markets, Singhvi said developments around the Strait of Hormuz, Middle East oil supplies and the direction of crude prices will remain important.
