🟢 Oil markets are being driven less by supply and demand and more by politics. Geopolitical tensions have added an estimated $5 to $7 per barrel risk premium, pushing Brent higher as traders react to uncertainty rather than fundamentals.
📊 Ironically, the last two years were defined by oversupply. The International Energy Agency estimates global inventories surged by 477 million barrels in 2025 thanks to increased production from the US, Brazil and OPEC+. That surplus kept both Brent and WTI stuck in a prolonged bear market.
🌍 Now attention has shifted to diplomacy and conflict. Negotiations involving the US and Iran, along with the ongoing Russia Ukraine standoff, have become the main forces setting oil prices as traders weigh the risk of global economic disruption.
🚢 In a worst case scenario, Iran could close the Strait of Hormuz, potentially sending Brent toward $108 per barrel. At the same time tighter sanctions on Russia are forcing major buyers to seek alternative supplies, increasing demand for non Russian crude.
🛢️ OPEC+ may also act. Sources suggest production hikes could begin as early as April, while some forecasts expect remaining voluntary cuts of 1.66 million barrels per day to be unwound within six months, potentially capping further upside.
📉 In a calmer outcome, analysts expect diplomatic agreements by summer. If tensions fade, Brent could settle around $65 to $70 before weaker fundamentals pull prices closer to $60 to $62.
📅 The oil market now hinges on one question. Will geopolitics override fundamentals, or will supply once again dominate pricing?
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