Crude oil prices declined sharply on the Multi Commodity Exchange (MCX) on Friday, January 30, with the continuous crude oil futures contract falling 1.6% to around Rs 5,935 per barrel, snapping the recent rally that had pushed prices to multi-month highs. The decline mirrors weakness in global crude benchmarks and reflects profit booking, a stronger US dollar, and easing fears of immediate supply disruption.
Profit booking after sharp rally
The primary reason behind today’s fall is aggressive profit booking. Crude oil prices had surged in recent sessions on heightened geopolitical risk, with Brent and WTI climbing to their highest levels in months. After such a strong run-up, traders moved quickly to lock in gains, leading to selling pressure across global and domestic futures markets.
Global crude prices retreat
Internationally, crude prices eased after Thursday’s rally:
- Brent crude slipped below the $70 per barrel mark after hitting its highest level since late July.
- US West Texas Intermediate (WTI) also declined after settling at a multi-month high in the previous session.
Markets pared risk premiums as the immediate threat of a US military strike on Iran or a disruption to shipping through the Strait of Hormuz did not materialise, prompting a pullback from elevated levels.
Stronger dollar weighs on oil
A rebound in the US dollar added further pressure on crude oil prices. The dollar strengthened after President Donald Trump said he would soon announce his nominee for the next Federal Reserve chair and amid optimism that the US government would avoid a shutdown. A firmer dollar typically weighs on oil prices by making dollar-denominated commodities more expensive for non-US buyers.
Geopolitical risk priced in, for now
While geopolitical tensions in the Middle East remain elevated, markets appear to be reassessing the likelihood of prolonged supply disruptions. US officials have indicated that no final decision has been taken on military action against Iran. Analysts expect that any potential conflict, if it occurs, would likely be targeted and avoid major oil production or export infrastructure, limiting long-term supply impact.
Supply concerns ease marginally
Some supply-side pressures also showed signs of easing. Kazakhstan has begun restarting production at the Tengiz oilfield after earlier disruptions, while recent moves by the US to ease certain sanctions on Venezuela’s oil sector have raised expectations of incremental supply returning to the market over time.
Big picture: monthly gains intact
Despite today’s decline, crude oil remains on track for its strongest monthly gains in years, supported by earlier geopolitical risk premiums and supply disruptions across multiple regions. Friday’s fall reflects short-term adjustments rather than a reversal of the broader trend.
In summary, the near-2% drop in MCX crude oil prices is driven by profit booking after a sharp rally, dollar strength, and easing near-term supply fears, with volatility expected to remain elevated as geopolitical developments continue to unfold.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Commodity market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions.
