New Delhi: Global oil prices extended gains on Thursday, after a sharp 7% jump in the previous session, as the US's stance on Iran stoked fears of prolonged supply disruptions.
Brent crude traded close to $120 a barrel, following comments by US President Donald Trump that Washington would not end the ongoing naval blockade of the Strait of Hormuz until a nuclear deal is signed with Iran.
The June contract of Brent on the Intercontinental Exchange was trading at $119.80 per barrel early Thursday, up 1.50% from its previous close, while the June contract of West Texas Intermediate on the Nymex rose 0.36% to $107.26 a barrel.
In an interview with US news website Axios on Wednesday, Trump said, “The blockade is somewhat more effective than the bombing. They are choking like a stuffed pig. And it is going to be worse for them. They can’t have a nuclear weapon.”
The remarks come even as Iran floated a proposal earlier this week to reopen the Strait of Hormuz while deferring negotiations with the US on its nuclear programme. However, US President Donald Trump was reportedly “unhappy” with the proposal as it failed to address the issue of Iran's nuclear programme.
The stalemate over peace talks and continuing blockade of the Strait of Hormuz has crippled global energy supplies. The strait has traditionally been a channel for about 20% of global oil and gas trade.
For India, which imports most of its energy requirements, this blockade has disrupted supplies of liquefied petroleum gas, liquefied natural gas, and crude oil. Imports comprise about 90% of India's annual oil consumption.
Rating agency Icra on Wednesday projected raw material cost pressures as well as supply constraints to impact the profitability of key downstream sectors – oil marketing, fertiliser, chemical and city gas distribution sector in FY27.
Further, with retail prices of regular petrol and diesel remaining unchanged, the profitability of oil marketing companies has taken a hit, according to the ratings agency.
“The stable pump prices for auto fuels amid elevated crude oil prices are impacting the profitability of the oil marketing companies (OMCs) despite the recent reduction in excise duty," said Prashant Vasisht, senior vice president & co-group head, Icra.
"At crude prices of $120-125/barrel and long-term averages of crack spreads, the marketing margins on petrol and diesel are estimated to be negative ₹14/litre and ₹18/litre respectively," Vasisht added.
