Demand concerns have kept oil prices low, while US sanctions on Iran cap decline

Brent’s August contract on the Intercontinental Exchange was trading at $119.43 per barrel at 11:55 a.m., down 0.32 percent from its previous finish.

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Crude oil prices fell on Friday as investors worried about a drop in demand following the US Federal Reserve’s sharp interest rate hike.

Analysts, on the other hand, believe that the drop is limited due to the US’s new sanctions on Iranian petrochemical businesses.

Brent’s August contract on the Intercontinental Exchange was trading at $119.43 per barrel at 11:55 a.m., down 0.32 percent from its previous finish. Similarly, the West Texas Intermediate contract for July declined 0.37 percent to $117.16 per barrel.

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Demand concerns weighed on crude prices, according to Ravindra Rao, head of commodity research at Kotak Securities, as major central banks’ monetary tightening threatens to disrupt economic activity.

“Disappointing US economic data also shows increasing challenges for the economy. Crude is pressurized also as US government has increased pressure on energy companies to boost supply,” he said.

However, Rao added that the prices were supported by concerns about constrained supply as a result of the current Russia-Ukraine war and new US sanctions on Iran. “Crude may remain choppy as demand concerns are countered by supply risks however tightness concerns may keep prices supported,” he said.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said: “Oil prices rose on Thursday in a topsy-turvy trading after the US announced new sanctions on Iran, even as energy markets stayed focused on supply concerns that have sent prices soaring this year. The market slipped earlier as interest rate hikes by the US Fed, Britain and Switzerland fueled worries of slowing global economic growth.”

During the current session, he added, crude oil prices are projected to remain volatile.

Despite the volatility in global oil prices, retail petrol and diesel prices in India have stayed relatively stable for nearly four weeks. On Friday, petrol was priced at ₹96.72 per litre in the national capital, while diesel was priced at ₹89.62 per litre.