There was a sharp fall in the prices of crude oil in the global markets on Tuesday night. Brent crude fell about 2.8% to $ 58.85 per barrel. At the same time, the American benchmark WTI crude slipped below $ 55 per barrel, reaching this level for the first time since February 2021. Such a huge price crash is a big signal for the international markets that further weakness in crude may be seen in the coming days.
Some important reasons are believed to be behind this huge fall in prices. The first is the oversupply of oil and the second is the hopes of ending the war between Russia and Ukraine.
Supply increased in the market, but demand weak
For the last several months, oil producing countries do not seem to be unanimous on the decisions to cut production. Continuously increasing supply and weak demand have put pressure on prices. According to energy analysts, demand is already slow in China and Europe. America is also increasing its domestic oil supply, due to which there is a glut of oil in the global market. When the availability of oil is high and buyers are less, the price is sure to fall.
Apart from this, storage data in the US also shows that crude oil reserves are higher than expected. This is sending a message to the market that at present there is no threat to supply.
Hope of ending war between Russia and Ukraine
The second big reason is that there are possibilities of peace regarding the Russia-Ukraine war. For the last two weeks, international media reports have been claiming that there are signs of talks regarding a ceasefire. If this happens then the global supply network will become even more smooth. Oil prices reached record highs after the war began, as Russia is one of the world’s largest oil exporters.
But now as soon as an environment of peace is created, it is natural for the price of oil to fall. Investors are confident that there will be no further supply disruptions.
Investors’ morale broken, selling intensified
After the fall in oil prices, there was heavy selling in the futures market also. Investors fear that the global economy may slow down in the coming months. When the economy is weak, oil consumption also decreases. This is why traders have intensified their selling.
What will be the impact on India?
India is the third largest oil importer in the world. In such a situation, India will get a big benefit from falling oil prices. If this decline continues then the expectation of reduction in prices of petrol and diesel may also become stronger. This will reduce the transport cost of companies and reduce pressure on inflation.
However, there is another challenge that the rupee is weak. At present the Indian rupee is trading weak against the dollar. If the rupee falls further then India will not be able to get the full benefit of cheap oil.
impact on stock market
The fall of oil is positive for India, but global uncertainty may still surround the market. The rapid fall in prices raises questions about the health of international economies. Therefore, the movement of the Indian stock market today will depend on the movement of rupee, foreign investment and global signals.
The decline of oil is a big change for the whole world. Analysts believe that if Brent remains below $58, the price may further go up to $55. Whereas support for WTI is being seen at $52.
Oversupply, weak demand and expectations of an end to the war are determining the direction of oil.
