Category: Oil and Gas

Crude oil futures are likely to remain volatile next week as uncertainty over US-Iran negotiations and escalating tensions in West Asia keep supply risks elevated, even as hopes of a deal to reopen the Strait of Hormuz offer scope for a correction, analysts said.

Investors will track the monthly oil market reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency, along with the American Petroleum Institute’s weekly inventory numbers and US government data on crude inventories and imports, they added.

The geopolitical situation remains fluid after US President Donald Trump said Washington was considering joining Saudi strikes against Iran-backed Houthi rebels in neighbouring Yemen, following an attack on Riyadh’s international airport.

“The widening conflict has heightened concerns over energy shipments through the region, including the strategic Bab el-Mandeb Strait,” said Navneet Damani, Head of Research – Commodities at Motilal Oswal Financial Services Ltd.

On the Multi Commodity Exchange (MCX), crude oil futures for October delivery fell ₹35, or 0.4 per cent, last week to settle at ₹8,881 per barrel. The November contract, however, gained ₹82, nearly 1 per cent, to close at ₹8,828 per barrel.

“Crude oil is caught between diplomatic optimism and persistent physical supply risks. MCX crude holding above ₹8,500, against pre-war levels near ₹6,500, highlights the significant supply-risk premium still embedded in prices,” Damani said.

He added that any positive response from Iran to the US proposal could trigger further near-term correction, but past experience shows that diplomatic progress alone rarely ensures a lasting recovery in supplies.

Earlier, Trump said discussions between Washington and Tehran were constructive, and the US would not launch a military strike against Iran before the November 3 midterm elections.

“Globally, developments around US-Iran diplomacy and crude oil prices will remain critical. Any progress on a framework for reopening the Strait of Hormuz could ease energy prices and provide some relief to India’s import bill and the rupee, while renewed geopolitical tensions could keep volatility elevated,” Ajit Mishra, SVP – Research, Religare Broking, said.

Iran, meanwhile, is evaluating the US response to its proposal on reopening the Strait of Hormuz.

Damani said the Strait of Hormuz remained severely constrained, with September’s recovery in exports largely driven by alternative routes that are costly, stretched and vulnerable to disruption.

In global markets, Brent futures for December delivery rose $2.47, or 2.41 per cent, to $104.72 per barrel, while West Texas Intermediate crude gained 1 per cent to settle at $91.85 per barrel in New York.

The volatility in oil prices was also driven by the production disruptions in the US Gulf of Mexico due to hurricane-related shutdowns, which supported WTI prices, helping the contract recover from earlier losses on Friday. This support could fade as production resumes, Damani said.

On the near-term outlook, he said that global supply expectations continue to be revised lower, with a meaningful recovery in Gulf supplies uncertain before 2027.

According to Choice Broking, escalating tensions in West Asia disrupted global logistics; attacks on 11 tankers in the Strait of Hormuz drove freight rates to record highs and caused severe shipping bottlenecks.

However, gains in oil prices were capped after the US Treasury issued a temporary licence allowing Russia to release 22.5 million barrels of diesel into global markets, while diplomatic de-escalation talks involving Western allies and Ukraine in Miami offered some relief, the brokerage firm said.