Crude faces volatile week as W Asia supply risks keep mkts tense: Analysts

Crude oil prices are poised for another volatile week, with supply worries in West Asia keeping markets on edge and stalled US-Iran talks adding to fears of fresh disruptions, even as efforts to ease shortages offer some relief, analysts said.

Investors will track weekly crude stocks data from the American Petroleum Institute (API), Cushing inventories, overall US oil stocks and crude imports for signals on the supply-demand balance.

The Strait of Hormuz remains a key source of uncertainty, with any disruption to shipments through the critical waterway threatening to further tighten global supplies.

The domestic commodities market will remain closed during the morning session on Tuesday due to Dussehra.

 

"Our outlook remains cautiously bullish, with price movements likely to be driven primarily by geopolitical developments and actual supply disruptions rather than headlines alone," said Ajit Mishra, SVP of Research at Religare Broking.

Recent declines in US crude inventories have provided additional support. A further escalation in geopolitical risks could push Brent crude towards USD 115-120 per barrel, Mishra said.

On the Multi Commodity Exchange, crude oil futures for November delivery rose by Rs 566, or 6.4 per cent, over the past week to close at Rs 9,394 per barrel.

In international markets, Brent crude futures for December delivery gained USD 5.14, or nearly 5 per cent, over the week to settle at USD 109.86 per barrel, touching the USD 110-level on Friday.

West Texas Intermediate futures for the same delivery month advanced USD 8.01, or nearly 9 per cent, to settle at USD 99.02 per barrel.

"Crude oil's muted response to a series of bearish headlines signals a market increasingly dominated by physical supply constraints rather than policy-driven optimism," Navneet Damani, Head of Research - Commodities at Motilal Oswal Financial Services Ltd.

He said G7 stock releases, a US-Russia diesel deal and plans to ease sanctions on Moscow's shadow fleet had raised hopes of improved supplies, but the measures have failed to trigger a sustained decline.

Logistical bottlenecks and an uneven recovery in supply continue to constrain crude availability. The increase in West Asian exports in September was largely driven by Saudi Arabia. However, vessel attacks, Houthi threats and limited capacity on alternative routes leave regional flows exposed to further disruptions.

The lack of progress in US-Iran, delayed Chinese crude arrivals, and an 8-million-barrel draw in US inventories have added to supply concerns, Damani said.

The International Energy Agency's (IEA) warning of prolonged diesel tightness has also raised concerns over refined-product availability.

Both the IEA and US Energy Information Administration have projected a broader recovery in supplies only in 2027, subject to production gains and secure export routes.

Mishra said an escalation or damage to energy facilities in West Asia could lift Brent prices by increasing the geopolitical risk premium.

US President Donald Trump's executive order waiving key sanctions, restrictions and tariffs on Russia and Iran has offered temporary relief to major buyers of Russian oil, including India, amid rising energy prices.

However, it does not remove the threat of supply disruptions if attacks on Russian energy infrastructure affect production or exports, leaving crude markets sensitive to developments on multiple fronts.