Oil Markets React to Geopolitical Developments
Crude oil prices experienced a significant downturn on Tuesday, completely wiping out the gains achieved during Monday's trading session. This reversal comes amid growing reports of substantial progress in peace negotiations between Ukraine and Russia, creating uncertainty in energy markets about future supply dynamics.
The possibility of a peace agreement between the two warring nations could potentially lead to increased global oil supplies, offsetting the positive sentiment that had been building in broader financial markets. This development marks another chapter in what has been a challenging year for oil prices, with futures positioned for their fourth consecutive monthly decline in November - representing the longest continuous stretch of losses since 2023.
Indian Market Performance and Global Benchmarks
On the domestic front, crude oil prices traded relatively flat on the Multi Commodity Exchange (MCX) during Tuesday's session. MCX crude oil price settled at ₹5,236 per barrel, demonstrating minimal movement throughout the day. The commodity reached an intraday peak of ₹5,254 and dipped to a low of ₹5,229, indicating restrained trading activity.
In contrast to the domestic market's stability, global benchmarks showed modest upward movement. Brent crude oil prices increased by 0.50% to reach $63.06 per barrel, while US West Texas Intermediate (WTI) futures climbed 0.46% to $58.57. This divergence highlights the complex factors influencing oil markets across different regions.
The decline in crude prices occurred despite Asian stock markets mirroring gains witnessed on Wall Street, fueled by growing expectations of additional interest rate reductions from the US Federal Reserve. Both major crude benchmarks had gained 1.3% on Monday, bouncing back from one-month lows driven by widespread risk-on sentiment and increasing hopes for a Federal Reserve rate cut in December.
Key Factors Driving Oil Price Volatility
Market analysts identify several critical factors contributing to the current volatility in crude oil markets:
Oversupply Concerns: Increased production from non-OPEC countries, particularly US shale operations, combined with indications of sufficient global inventories has limited price increases and created downward pressure on markets.
Ukraine-Russia Peace Negotiations: Fluctuating optimism regarding a potential peace agreement has periodically reduced the geopolitical risk premium typically built into oil prices. When talks show genuine progress, this contributes significantly to downward price pressure.
Weak Global Demand: Persistent worries about slower worldwide economic growth and tepid demand for refined products, especially in Europe and certain Asian markets, have made bullish investors increasingly cautious about oil's near-term prospects.
Expert Outlook and Price Projections
Rahul Kalantri, Vice President of Commodities at Mehta Equities Ltd, expects crude oil prices to maintain their volatile trajectory in the coming sessions. "Crude oil is having support at $57.90-57.40 and resistance is at $59.10-59.60 in today's session", Kalantri stated, providing specific technical levels for traders to monitor.
For Indian market participants, Kalantri identified support levels at ₹5,175-5,120 with resistance positioned at ₹5,300-5,375. These projections offer valuable guidance for investors navigating the current uncertain market conditions.
Interestingly, oil prices managed to rebound on Monday despite the agreement between the US and Ukraine to revise the draft of the Russia-Ukraine peace deal. Additional support came from China's stimulus initiative aimed at revitalizing its housing market, which continues to provide a floor for oil prices during periods of decline.
