Crude Oil Prices Rise on MCX Despite Global Decline

MCX crude oil prices rose by up to 4% to ₹7,718 per barrel on Wednesday, March 11, despite a decline in Brent crude prices. The global decline in crude prices, which saw Brent crude prices drop 0.26% to $87.57 per barrel and West Texas Intermediate (WTI) crude futures fall 0.44% to $83.08, was attributed to reports that the International Energy Agency (IEA) had proposed the largest release of oil reserves in its history to ease crude prices.

Domestic Factors Offset Global Decline

The rise in MCX crude oil prices can be attributed to domestic and macroeconomic factors offsetting the decline seen in Brent crude prices. The depreciation of the Indian rupee against the US dollar increases the effective import cost of crude for India, as MCX contracts are rupee-denominated, while Brent trades in dollars. Additionally, rising geopolitical uncertainty surrounding the US–Iran conflict has added a risk premium to oil markets, with investors pricing in potential supply disruptions.

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Supply Disruptions and Production Restraint

Major Middle Eastern producers have maintained significant production restraint, with collective output cuts exceeding 6 million barrels per day, tightening global supply expectations. The conflict in the Middle East, now in its second week, has pulled more than a dozen countries into the confrontation and raised fears of a fresh inflationary surge. US retail gasoline prices have climbed sharply, adding further pressure on the situation.

Key Statistics

• 6.7 million barrels per day: collective reduction in oil output by Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait
• 40% to 50%: percentage of India's crude oil imports passing through the Strait of Hormuz
• $87.57: Brent crude price after a 0.26% decline
• $83.08: WTI crude futures price after a 0.44% decline

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline