Crude Oil Prices Retreat After Four-Day Rally
Crude oil prices moved lower on Wednesday, ending a four-session winning streak. The decline came as Venezuela resumed exports and US inventories showed a significant build-up. However, ongoing civil unrest in Iran continued to lend some support to the market, preventing a steeper fall.
Domestic and International Market Movements
On the Multi Commodity Exchange, February crude oil contracts eased by ₹22, representing a 0.4% decline. Prices settled at ₹5,507 per barrel with a trading volume of 11,113 lots. The domestic market tracked subdued global cues as excess supply concerns weighed on sentiment.
Internationally, Brent crude futures slipped 20 cents to $65.27 per barrel. US West Texas Intermediate crude declined 23 cents to $60.92 per barrel. Analysts noted that traders pared positions amid sluggish demand in the spot market, contributing to the downturn.
Key Factors Driving Price Movements
Several developments influenced crude oil prices on Wednesday. Venezuela, an OPEC member, has begun rolling back output cuts imposed during the US embargo. According to Reuters sources, crude exports are resuming from the South American nation.
Two supertankers left Venezuelan waters on Monday, each carrying approximately 1.8 million barrels of crude. These shipments could represent the first deliveries under a proposed 50-million-barrel supply agreement between Caracas and Washington. The agreement aims to restart exports following the US capture of President Nicolás Maduro.
Meanwhile, escalating protests in Iran have raised concerns about potential supply disruptions. Iran ranks as the fourth-largest OPEC producer. On Tuesday, US President Donald Trump encouraged Iranians to continue demonstrating and promised forthcoming assistance, though he provided no specific details.
US Inventory Data Adds Pressure
An industry report revealed that US crude inventories climbed by 5.3 million barrels last week. If confirmed by official figures released later Wednesday, this would represent the largest weekly build in two months. The American Petroleum Institute's data also indicated increases in gasoline and distillate stocks, adding to the bearish sentiment.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd., commented on the market dynamics. "Crude oil extended its rally and touched a two-month high in international markets amid concerns over potential supply disruptions from Iran," he said. "Prices were supported after the US President announced a 25% tariff on countries purchasing Iranian crude, adding to supply worries following fresh US sanctions."
Kalantri noted that escalating Russia-Ukraine tensions also provided support. Additionally, steady US core CPI figures for December aided market sentiment. However, he highlighted that expectations of resumed Venezuelan supply under US control, combined with the sharp rise in US crude inventories, may limit further price increases.
Analyst Outlook and Price Projections
Suvro Sarkar, an energy analyst at DBS Bank, shared his perspective with Reuters. He suggested that oil prices have already priced in considerable geopolitical risk premium in recent days. This premium reflects rising turmoil in Iran, compounded by drone attacks in the Black Sea region.
"Unless we see further escalation and chances of actual disruption in oil flows, the market could consolidate at these levels," Sarkar explained. "Traders will wait for the next moves in a complex world order." He added that large crude and product builds in the US, reported by API late Tuesday, may also be weighing on prices.
Kalantri of Mehta Equities expects continued volatility in crude oil prices. "We expect crude oil prices to remain volatile in today's session," he stated. "Crude oil is having support at $59.50-58.80 and resistance is at $61.20-61.90. In INR terms, crude oil has support at ₹5,430-5,370 while resistance stands at ₹5,585-5,645."
The market continues to balance multiple factors, including geopolitical tensions, supply developments, and inventory data. Traders will monitor upcoming official inventory reports and geopolitical developments for further direction.
