Oil prices rise to $105 amid US-Iran ceasefire concerns
What's the story
Global oil prices have witnessed a spike on Tuesday morning, owing to supply concerns stemming from a fragile US-Iran ceasefire. The July contract of Brent crude oil on the Intercontinental Exchange was trading at $104.82 per barrel, up by 0.44% from its previous close. Meanwhile, West Texas Intermediate's June contract on the New York Mercantile Exchange rose by 0.6% to $98.66 per barrel.
Ceasefire tensions
US-Iran tensions escalate
US President Donald Trump has warned that the ceasefire is on "massive life support" and is "unbelievably weak." Iranian parliamentary speaker Mohammad Ghalibaf responded by saying Iran's armed forces are ready to respond to any aggression. He tweeted in Persian, "Our armed forces are ready to deliver a harsh and instructive response to any aggression; misguided strategies and erroneous decisions will always yield erroneous outcomes and the entire world has already grasped this truth."
Supply intervention
Trump administration to loan oil to stabilize markets
In a bid to stabilize oil markets, the Trump administration has announced plans to loan energy companies 53.3 million barrels of crude from the US Strategic Petroleum Reserve. This comes as a global effort amid fears that an extended conflict and potential blockade of the Strait of Hormuz could further strain global oil supplies. The strait accounts for nearly one-fifth of international oil trade, making it a critical point in global energy security.
Import impact
India urges citizens to conserve fuel, avoid unnecessary travel
The ongoing conflict has had a major impact on India, which imports nearly 90% of its oil requirements. Prime Minister Narendra Modi has urged citizens to use public transport more, work from home if possible, and rationalize petrol and diesel consumption to conserve foreign exchange. An official statement released after a meeting of the informal group of ministers (IGoM) on the West Asia crisis revealed that India currently has 60 days' worth of crude oil reserves.
Revenue impact
OMCs incur revenue losses as retail prices remain unchanged
Despite high crude prices, retail prices of petrol, diesel, and LPG have remained largely unchanged. This has led to mounting revenue losses for oil marketing companies (OMCs). Petroleum Minister Hardeep Singh Puri tweeted on Sunday that OMCs are incurring losses of up to ₹1,000 crore per day. He further warned that estimated under-recoveries during this quarter are expected to surge to ₹2 lakh crore with losses likely around ₹1 lakh crore.