The text discusses renewed oil price increases driven by supply concerns in India and China, against a backdrop of Middle East shipping disruptions and geopolitical tensions.

Oil Price Movements and Market Context

After a brief overnight drop, oil price rises resumed. May futures for benchmark Brent crude fell by about $1 to $84.50 per barrel due to supply worries centred on China and India, interrupting a week of constant gains. By Friday morning UK time, Brent was trading around $85.70/bbl. The benchmark had previously surged 5% to a 20-month high of $86.28/bbl on Thursday before easing to $85.41/bbl. Traders were unimpressed by US promises aimed at curbing rising energy prices.

India's Supply Situation and US Waiver

The US Office of Foreign Assets Control (OFAC) approved a 30-day waiver for India to resume purchases of Russian crude, which it had halted in January following US pressure and sanction threats. This waiver is seen as a "relief valve" given the loss of nearly 20 million barrels per day of crude from Gulf producers, but is considered "not nearly enough." India, the world's fifth-largest petroleum product exporter, had been replacing Russian crude with Middle East volumes. However, conflict in Iran and disruption to shipping through the Strait of Hormuz—a chokepoint for about 20% of global oil transit—have jeopardised these deliveries. India's purchases will focus on Russian crude stranded on tankers, with over 40 million barrels noted as being stuck at sea. Analysts highlight India's vulnerability, with crude stocks covering only about 25 days of demand.

China's Supply Concerns and Market Impact

Authorities in China instructed the country's key refiners to suspend exports of diesel and gasoline, contributing to expectations of a further global tightening of oil supplies. This action underscores that China remains far from energy independent, importing more than 70% of its daily oil requirements.

Market Outlook and Geopolitical Tensions

Despite the conflict spreading to another oil-producing country, Azerbaijan, where a regional airport was drone-attacked, the market is still pricing in a quick solution to the Middle East conflict. Futures data for December delivery traded around $71.85 per barrel, with analysts noting that the futures markets are "still predicting a short end to the war."