Crude oil prices experienced a notable decrease of 3.9%, closing at Rs 8817, influenced by a growing optimism regarding potential diplomatic advancements between the U.S. and Iran, which impacted market dynamics. Despite the prevailing optimism, fundamental tensions remain, as the U.S. upholds a naval blockade on Iranian ports and continues to impose restrictions on crude exports from the Persian Gulf. Activity in the Strait of Hormuz continues to be hindered, characterized by restricted flows and sporadic tanker movements that underscore persistent geopolitical uncertainty.

Regarding the fundamentals, the global supply-demand dynamics continue to exhibit a mixed outlook. At the conclusion of the previous year, strategic petroleum reserves were approximately 2.5 billion barrels, serving as a safeguard against potential supply disruptions. However, the outlook for demand has notably weakened. S&P Global has adjusted its 2026 global oil demand growth forecast downward to 400,000 bpd, a significant reduction from the previous estimate of 1.1 million bpd. This revision is attributed to disruptions related to ongoing conflicts, especially in the Middle East and Asia.

In a similar vein, OPEC has revised its Q2 demand forecast downward by 500,000 bpd to 105.07 million bpd, attributing this adjustment to transient weakness stemming from geopolitical developments. In the U.S., inventory data revealed an increase in crude stocks by 1.9 million barrels to 465.7 million barrels, contrary to expectations of a draw, suggesting a decline in near-term demand. Nevertheless, refined products presented a more constrained scenario, as gasoline inventories decreased by 4.6 million barrels and distillates saw a reduction of 3.4 million barrels, indicating consistent consumption patterns. Net imports increased, contributing to supply pressure.

From a technical perspective, the market is experiencing long liquidation, evidenced by a 9.06% decrease in open interest to 11,003, alongside a price decline of Rs 358. Crude oil encounters immediate support at Rs 8629, and a breach below this level could lead to a test of Rs 8440. On the upside, resistance is positioned at Rs 9128, and a sustained movement above this threshold could propel prices towards Rs 9438.