In the coming days, the common man can get a big relief from the prices of petrol and diesel in the country. In fact, a huge decline of 5 percent has been recorded in the prices of crude oil in the global market. Behind this big stir is a very important statement of America’s President Donald Trump. Trump has given clear indications that a big deal is going to be made with Iran. As soon as this news came out, the price of Brent crude, considered the benchmark of crude oil, fell to $ 105 per barrel. At the same time, the American benchmark West Texas Intermediate (WTI) also slipped to near $ 99 per barrel. However, after the huge fall, a slight recovery has also been seen in the prices.
What did Trump say that caused crude oil prices to fall?
This softening in the crude oil market was seen when a very important update came out from Washington. The US President told journalists that the ongoing talks between Washington and Tehran have now reached their final stage. This statement has raised hopes in the market that one of the biggest obstructions in the way of oil supply in modern history can be eliminated soon. In anticipation of smooth supply of oil from West Asia, the prices of Brent crude slipped downwards.
The most important route to the world’s oil market
To understand this entire incident it is necessary to go back a little. Oil prices are up nearly 40 percent since the geopolitical conflict began in late February. For the last several months, oil traders were facing only one fear that the ‘Strait of Hormuz’ might be completely closed. This is the same sea route through which about one-fifth of the world’s crude oil passes. The fear was that if this route remained closed till next year, the supply chain would completely collapse. But now, with the sound of a diplomatic breakthrough, there is hope in the market that millions of barrels of oil stuck in the Persian Gulf will soon be released. If this happens, the ‘geopolitical risk premium’ associated with crude oil prices will reduce rapidly.
Ground reality of oil supply till 2027
Even though there has suddenly been a positive environment in the market, industry leaders are still cautious about the ground reality. Sultan Al Jaber, Chief Executive Officer of Abu Dhabi National Oil Company, has clarified the situation in the information given to Bloomberg. He says that even if this conflict ends immediately today, the flow of oil from the Middle East will not return to normal overnight. It may take a long time till the year 2027 for this entire supply network to return to its old position.
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