Crude oil prices have climbed sharply, with Brent nearing $110 a barrel and West Texas Intermediate crossing $101, as the United States prepares to make 17 million barrels from its Strategic Petroleum Reserve available to companies through an oil-swap arrangement. The move is intended to increase near-term supply and ease pressure in international energy markets, but its effect on Indian petrol and diesel prices will depend on how long global prices remain elevated.
Brent crude rose 3.72% to around $110 a barrel, while WTI gained 3.51% to $101.40, according to the report. The price rise has been linked to concerns over disruptions to oil supplies, including the impact of the conflict involving Iran, attacks on vessels in the Gulf region and difficulties around the Strait of Hormuz, one of the world’s key maritime routes for crude shipments.
The US Department of Energy sought proposals from companies on Friday for a new exchange programme. Under the arrangement, companies would receive crude oil from the government for immediate use and return it later under agreed terms. Such a mechanism can add barrels to the market without constituting a permanent depletion of the emergency reserve.
The Strategic Petroleum Reserve is maintained for crises involving war, supply interruptions or unusually sharp price increases. The proposed release amounts to about 17 million barrels. However, the report noted that releasing oil from the reserve would not automatically bring prices down if shipping disruptions continue or the market remains concerned about a wider supply shortfall.
The latest proposal follows an earlier international commitment made in March. The United States had pledged to make 172 million barrels available as part of a coordinated plan involving around 30 member countries of the International Energy Agency. The wider plan targeted the release of 400 million barrels from emergency reserves to reduce the impact of supply disruptions.
That earlier effort encountered limited industry interest. Companies reportedly sought only about 500,000 barrels in June, with one reason being the terms of the arrangement. Borrowers could have been required to return up to 24% more crude than the amount they received, making the transaction less attractive. The response to the new US offer will indicate whether revised conditions can bring more supply into the market.
The US is also reported to have reached an understanding with Russia on allowing exports of Russian diesel, with an initial release of around 300,000 tonnes expected. The move has drawn criticism from Ukraine and European leaders, who argue that easing restrictions on Russian oil products could provide economic relief to Moscow. Separately, the G7 announced on October 2 a plan to make about 100 million barrels available over four months through the IEA, with additional attention to diesel supplies.
For India, the immediate concern is the cost of imported crude. Higher international prices increase the import bill and can raise pressure on the operating costs of fuel companies and the wider economy. Any sustained fall in global crude prices could therefore provide relief, but it would not necessarily translate into an immediate reduction in domestic petrol and diesel prices.
Indian fuel prices are also influenced by the rupee-dollar exchange rate, oil companies’ costs, and central and state taxes. The impact of the US reserve release on Indian consumers will depend on the size and duration of any international price decline. The next key indicator will be the response from companies to the US oil-swap proposal and whether supply concerns around the Gulf and the Strait of Hormuz ease.
