Crude oil prices fall sharply, reaching a 6-week low; will petrol and diesel really become cheaper now? Big fall in crude oil prices in the international market; Crude falls to lowest level in 6 weeks, know the reason

A big relief news has come for those keeping an eye on the prices of crude oil in the international market. Crude oil prices have fallen to their lowest level in the last six weeks due to the news of talks starting to extend the ceasefire amid the ongoing heavy tension between America and Iran. This positive change has raised hopes in the markets around the world that the most important and sensitive route of global oil trade i.e. ‘Strait of Hormuz’ can soon be fully opened again for the movement of ships.

Due to this major geopolitical movement, the US benchmark West Texas Intermediate (WTI) has fallen by almost 2% to $87 per barrel. At the same time, global benchmark Brent Crude has also slipped to near $92 per barrel. Throughout the month of May, the market was expecting a similar peace agreement, due to which a continuous softening of prices is being seen.

Trouble between Donald Trump and Iran’s claims

US President Donald Trump has indicated that he will make a “final decision” on an initial agreement to extend the existing ceasefire with Iran for another 60 days. During this 60-day period, both the countries can sit face to face and discuss the future of Tehran’s nuclear program.

However, on the other hand, Iran’s Foreign Ministry says that no final or final agreement has been reached yet. According to Iran’s spokesperson Ismail Baghai, no final deal has been reached between the two countries yet, but only the exchange of messages is going on.

Big warning from Chevron CEO: ‘The risk is not over yet’

Despite this latest softening in oil prices, Mike Wirth, Chief Executive Officer (CEO) of the leading global oil company Chevron Corp, has given a big warning. Speaking to Bloomberg TV, he said that even though oil traders are betting that the dispute is going to be resolved soon, in reality the risks to shipowners in the Persian Gulf still remain “very real.”

According to Wirth, this week also there have been attacks (Kinetic Activity) on some ships passing through the waters of the Strait of Hormuz, many of which have not even been reported in the media. Therefore, even if a peace agreement is signed, the environment in the Persian Gulf cannot yet be called completely safe.

Current equations of crude oil market (At a Glance)

How did the global market recover amid the crisis?

The effective closure of the Strait of Hormuz (which is blocked by Washington and Tehran) could have caused a major crisis in global energy supplies, but three major factors saved the world from this shock:

1. Bumper export of crude oil by America at record level.

2. There was a huge slowdown in the import of crude oil from China.

3. Releasing of their emergency reserves (emergency oil reserves) in the market by many big countries.

Thanks to these immediate solutions, about a quarter of the non-Iranian large oil tankers stuck in the Persian Gulf at the beginning of the Iran war have managed to get out safely.

What are the difficulties in permanently falling oil prices?

Treasury Secretary Scott Besant has made it clear that safely opening the Strait of Hormuz and Iran’s handover of highly enriched uranium are President Trump’s “red lines” on which there will be no compromise. Market experts believe that even if an agreement is reached to extend the ceasefire, there may still be several major obstacles for the crude oil market to become completely stable and normal:

• Marine Mines: Removing mines laid in the waters of the Strait of Hormuz will be an extremely time-consuming and complex task.

• Infrastructure repair: The massive damage caused to oil fields and energy infrastructure by drone and missile attacks could take months to repair.

• Supply Chain Delay: It will take several weeks for the closed fields to be restarted and the ships loaded with oil from there to reach the importing countries.

Stock is decreasing in US: Dennis Kisler, head of energy trading at BOK Financial Securities, says that to see WTI prices stable in the $80 range, we would need to see some sustained traffic in Hormuz for some time. Meanwhile, recent data has shown the tightness of crude oil in the US market. Crude oil holdings at the Cushing Hub in Oklahoma have fallen for the 5th consecutive week to 23 million barrels, which is very close to its minimum operating level (20 million barrels). In such a situation, the period of fluctuations in the market may continue for some more time.