It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions over its suspected nuclear programme relegated it to the seventh spot in the subsequent years. An uptick in the U.S. oil inventories according to last week's data also contributed to the softening.
The latest IG Retail Sentiment Indicatorshows traders are 42.9% net-long USA crude oil - a bullish contrarian sign. Despite an overall upward momentum, oil prices have been highly volatile.
During the first round of sanctions when European Union joined the USA in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought but beginning February 2013 paid almost half of the oil import bill in rupees while keeping the remainder pending till opening of payment routes.
"We view this [oil] as one of our top national security priorities", a senior administration official told the Free Beacon at the time. However recent shifts in sentiment suggests that prices may reverse lower.
Crude oil direction over the next month will be determined by how much Iran exports and whether Saudi Arabia can replace the lost output. This also led to the softening in global crude oil prices.
Oil prices have soared in response to fears of supply cutbacks, putting pressure on the Indian economy and leaving Delhi with few options. A major portion of the current uptick can be attributed to the production constraints in Libya, Venezuela and Canada. Iran can use the rupee to settle its imports of pharmaceuticals and other goods from India.
After a consecutive fall in the last few weeks, the United States oil inventories saw an uptick in the last reported data which also contributed towards the softening in the crude prices. Unlike many other news organizations, we have not put up a paywall. Oil dropped to around $83 a barrel on Monday.
An oil pump is seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018.
The months of September and October are infamous for hurricanes in the US.
Hedge funds cut their bullish wagers on US crude in the latest week to the lowest level in almost a year, data showed on Friday. Continuing uncertainty around weather development would be something to watch out for. "Government companies are not only profit making companies".
Oil has been supported by concern that the Iranian export loss will leave a thinner margin of unused production capacity to deal with supply shocks.
The volatility in the crude oil prices has been enormous in the last few weeks and is expected to continue.
Russian Federation and China are both pursuing their own systems and Germany has suggested creating Europe's rival to global financial messaging service SWIFT based on the euro rather than the dollar in order to bypass U.S. sanctions. Till then prices are expected to remain volatile and news flows could have significant impact on the prices in both directions.