Oil Prices Rebound Amid Lower Surplus Expectations
Oil’s extended gains midweek after the US revised down its global oversupply forecasts. The Energy Information Administration (EIA) slashed its oil surplus estimate for 2024. It also halved expectations for 2026, citing lower anticipated exports from Venezuela and Iran. These revisions helped push Brent crude toward $70 a barrel and West Texas Intermediate near $67.
Diminished Iranian and Venezuelan Output Key to Forecast
The oil outlook changed sharply due to political and operational constraints in major exporting countries. Sanctions and instability in Iran and Venezuela are expected to curb oil flows. This reduced supply may help balance weakening global demand, especially from China, which continues to impact oil markets.
Trump Tariffs Weigh on Oil Market Sentiment
Despite the modest rally, oil traders remain cautious. President Donald Trump’s ongoing trade war is stifling risk appetite across markets. Tariff uncertainty has disrupted investor confidence. Since mid-January, oil prices have dropped significantly due to these economic tensions. Traders now await more clarity from Washington on upcoming trade policies.
Rising US Inventories Add Mixed Signals
The American Petroleum Institute reported a 4.2 million-barrel increase in US commercial oil inventories. However, a substantial drawdown at Cushing, Oklahoma — a key WTI delivery point — suggests local supply pressure may ease. If confirmed by the Department of Energy, this would be Cushing’s first draw in five weeks.
Geopolitical Risks Add Complexity to Oil Outlook
Global tensions are once again supporting oil’s risk premium. In Europe, Ukraine agreed to a US-brokered 30-day truce with Russia, hinting at a temporary halt in hostilities. In contrast, the Iran-backed Houthi rebels in Yemen vowed to resume attacks on Israeli ships. These events have increased concerns over supply disruptions in key oil transit regions.
OPEC+ Plans Still Add Bearish Pressure on Oil Prices
OPEC+ is expected to increase oil output in the coming months. These plans have raised fears that additional supply will outpace demand. Combined with trade wars and fragile sentiment, these expectations have limited the upside for oil despite bullish supply revisions from key agencies.
Oil Traders Brace for More Volatility Ahead
Volatility remains the key theme in oil markets. On one hand, supply-side adjustments suggest support for prices. On the other, Trump’s trade war and uncertain demand from China continue to limit upward momentum. With geopolitical tensions and inventory swings in play, traders must remain nimble. Oil may continue to react sharply to headlines in the weeks ahead.