US Oil Prices Decline 3% Amid Rise in Crude Inventories, Downside Risks Persist

US-Iran Conflict: Crude Oil Prices Decline Amid Rising US Inventories

On Wednesday, March 18, crude oil prices experienced a decline due to a rise in US crude inventories, as reported by the American Petroleum Institute. Brent futures lost $2.31, or 2.24%, to $101.15 a barrel, while US West Texas Intermediate crude fell $3.20, or 3.21%, to $92.46. Similarly, crude oil prices on the Multi Commodity Exchange (MCX) shed 2.62% to ₹8,604 per barrel.

Crude oil prices have surged over 40% since the beginning of the US-Iran war, which has disrupted energy supply routes through the Strait of Hormuz and affected global energy markets, particularly in Asia. Prior to the war, crude oil in international markets traded at around $73 per barrel on February 27.

Key drivers of the current crude oil prices include:

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• A 6.56 million barrel increase in US crude inventories for the week ended March 13, as reported by the American Petroleum Institute.
• An agreement between the federal government and the Kurdistan Regional Government to restart crude exports to Turkey's Ceyhan energy hub.
• Gradual rerouting of oil flows from the Sharara oilfield through alternative pipelines after a fire.

Geopolitical developments also played a role in the decline of crude oil prices, including:

• The killing of Iran's security chief, Ali Larijani, at the hands of Israel.
• The US military's strikes on Iranian coastal sites near the Strait of Hormuz, citing threats from Iranian anti-ship missiles to global shipping routes.

Crude oil prices outlook remains uncertain, with Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, suggesting that the US-initiated 86 million barrel release from the Strategic Petroleum Reserve has eased immediate market panic but may not be a permanent supply addition. Brent is approaching a crucial support level around $99, while WTI has similar support near $90. MCX Brent futures have a key level to watch at ₹8,350.

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