On April 15, crude oil prices continued their losses for the second consecutive session amid renewed hope of potential US-Iran peace talks that quelled concerns of sustained supply disruptions. The price of Brent crude fell by 0.55% to reach $94.27 per barrel after a fall of 4.6% in the last session, and US West Texas Intermediate (WTI) fell by 1.1% to 90.24 per barrel, after falling by 7.9%.
On the Multi-Commodity Exchange (MCX), crude prices followed the global pattern as they declined 1%, which indicates reduced geopolitical risk premiums.
The key cause of the downward trend is that the growth in diplomatic talks between the United States and Iran can be reinstated. The US President Donald Trump said talks to end the conflict might resume in Pakistan in the next few days.
This optimism follows the recent tensions that have seen the Strait of Hormuz, a major international route of oil transport that accounts for 20% of global oil supply, closed. Despite a temporary ceasefire, the shipping activity continues to be limited, and the flow of vessels is much lower than the average of about 130 vessels per day before the conflict.
Although there is an improvement in sentiment through diplomatic signals, the physical conditions of supply are tight. This lack of connection is pointed out in a note by the Schork Group, which said, "While diplomatic headlines suggest the possibility of renewed US-Iran talks and even a temporary easing of transit restrictions, the physical reality remains fragmented."
The company further stated, "The result is a market that continues to price optionality around flow disruption rather than a return to equilibrium."
Also, the US move to allow Iranian oil expiry sanctions to expire may serve to tighten supply, despite the resumption of talks, to keep prices at a minimum.
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According to market analysts, in the short run, there are chances of a sideways movement of crude prices with a minor downward trend. Dilin Wu, a Pepperstone strategist, asserted that, “However, even if geopolitical tensions ease at the margin, any meaningful recovery in physical supply will lag,” with logistical bottlenecks off Hormuz keeping a floor under prices," Wu said.
Also, Anindya Banerjee of Kotak Securities observed that the market is moving to a more balanced form, and key levels are forming. WTI has been rallying in the new range of $85, and Brent near $90, but $105 would be a key level on both benchmarks, and a sustained decline below $90 Brent and $85 WTI would indicate a significant deflation.
With markets awaiting US inventory figures and additional geopolitical news, crude oil is poised to be headline-sensitive. Even though reduced tensions will limit upside.