A sharp decline in crude oil prices has been recorded amid ongoing uncertainty in the global energy market. The international benchmark Brent crude, which has been well above the psychological level of $ 100 per barrel for a long time, has now fallen to around $ 100 per barrel, while the American West Texas Intermediate (WTI) has slipped and is trading at the level of $ 95. Market experts believe that this change in market sentiment is being seen due to the strong performance of the Democrats in the US mid-term elections and the change in the balance of power. Energy investors now fear that the growing legislative impasse in Washington could put a brake on tighter tariffs and an aggressive foreign policy agenda, which is having a direct impact on commodity prices. Energy analysts say the global supply chain was already under stress, but oil speculators have started booking profits as US political equations changed. Possible changes in the policies of the White House, signs of economic slowdown and mixed statements regarding the Middle East have created all-round pressure on crude oil. The rise of Democrats in the midterm elections and the reaction of global markets The increasing control of the Democratic Party in both houses of the US Parliament has raised clouds of uncertainty over many of the economic policies of President Donald Trump. Markets from Wall Street to London and Singapore are discussing whether the Trump administration will be able to pursue its controversial decisions—particularly the tariff war and energy sanctions—with the same aggressiveness as before. Analysts believe that due to reduction in legislative power, there is sure to be a brake on big bills related to energy, due to which the fear of supply shortage in the market has suddenly reduced. Along with this political development, the US dollar index has also registered a slowdown. Generally, when the balance of power in the US Congress is divided, the possibility of any major sudden economic decision is limited. Investors took this as a sign that the White House would no longer be able to shock the global supply chain by taking unilateral decisions, due to which the aggression in oil purchases stopped and prices came down. How the oil market hesitated due to Trump's tough decisions and statements. Donald Trump's tenure has always been like a rollercoaster for the international oil market. His aggressive stance on many occasions caused huge surges in oil prices, while his sudden change of tone sent the market crashing in the blink of an eye. Crude oil hit a record high on fears it could disrupt supplies through the Strait of Hormuz as the Trump administration outlined tougher economic sanctions on Iran and hinted at military action in the Middle East. The market feared that 20 percent of the world's seaborne oil transport would be halted, sending prices skyrocketing. After this, in the context of the Russia-Ukraine crisis, warnings of imposing up to 100 percent tariff on countries purchasing Russian oil also created panic in the international market. If this law was fully implemented, the supply chain of big importing countries like China and India could be affected, which would seriously upset the balance of demand and supply. However, just before the election, Trump suddenly hinted at diplomatic compromise and peace talks and claimed that oil prices should fall and there was no rush to war. His U-turn statements forced hedge funds to change their positions, causing huge fluctuations in the oil market. What will be its direct impact on big importing countries like India? India imports more than 85 percent of its crude oil needs. In such a situation, crude oil falling around or below $100 per barrel in the international market is no less than a lifesaver for the Indian economy. If oil prices had remained above $100 for a long time, the country's current account deficit (CAD) would have increased rapidly, the Indian rupee would have come under heavy pressure and inflation could have gone out of control due to increase in domestic petrol and diesel prices. Moreover, concessional purchase of Russian crude remains a strong pillar of energy security for India. The Trump administration's blocking of a proposal to impose 100 percent tariffs and now the changing balance in the US Congress has given New Delhi the scope to continue its independent energy policy. Getting crude at lower costs for Indian refineries not only saves the country's foreign exchange reserves, but also accelerates industrial growth by keeping transportation costs under control. Outlook of Crude in the coming quarters and the way forward Energy sector experts believe that the $100 level of crude oil is a very sensitive technical level. If this level is broken, there could be further recession in the market. However, the production policies of OPEC+ countries and the outcome of talks being brokered by Qatar in the Middle East will decide the final direction of prices in the coming days. If behind-the-scenes talks between the White House and Tehran lead to a formal agreement, additional barrels of oil supply could be restored to the international market, which could push prices further down. On the other hand, if the Trump administration tightens trade restrictions through its veto power and executive orders, a rebound in oil prices cannot be ruled out. For now, the situation created by the withdrawal of the Democrats has put energy speculators on the back foot and has provided a much-needed relief to consumer countries around the world.
