This content is marketing material
Key points:
Crude oil markets remain caught in a tug-of-war between bullish near-term demand and rising geopolitical risks on one hand, and macroeconomic headwinds and rising OPEC+ production on the other. In the last hours, Brent crude briefly traded above USD 70 and touched highs last seen in April before drifting lower, as traders continue to digest a mix of conflicting drivers. On the bullish side, seasonal summer demand continues to tighten supplies. With peak travel and air conditioning usage underway, refiners are scrambling to meet surging gasoline and diesel demand, supporting near-term pricing. In their weekly crude and fuel stock report, the US Energy Information Administration reported a bigger-than-expected drop in crude oil inventories, not least due to refineries nationwide processing the most crude since December 2019 in order to meet summer demand However, this short-term tightness is increasingly expected to be offset by rising OPEC+ output into the autumn months, as a group of eight OPEC+ members aggressively restores production in an effort to reclaim market share, and a so far unsuccessful attempt to penalise above-quota producers amid current price strength. The added barrels should, over time, temper price gains while raising concerns about a potential oversupply if demand growth stalls.
Further complicating the picture are economic uncertainties tied to current global trade tensions. The latest wave of tariff threats, despite the prospect of a trade truce reset between the US and China, has rekindled fears of slower global growth, which could weigh on long-term oil demand expectations. In addition, President Trump told journalists that the US, within weeks, will be sending letters to its trading partners in which they will set their terms. Geopolitics, as always, remains a key wildcard that in recent years has rocked prices on several occasions, especially when we are dealing with developments that may disrupt the safe passage and distribution of crude oil and fuel products. The latest surge in Brent above a recent level of resistance around USD 68.50 was triggered by Iranian threats to strike American bases in the Middle East if the nuclear talks collapse and the country is attacked.
The US ordered some staff to depart its embassy in Baghdad due to heightened security risks, while the UK Maritime Trade Operations (UKMTO) issued a rare warning to mariners that higher tensions could affect shipping, including the Strait of Hormuz—the world’s most critical oil transit chokepoint that sees more than 20 million barrels of crude pass through daily. Even a brief disruption there could trigger a sharp price spike, with some analysts warning of a potential move toward USD 100 per barrel in a worst-case scenario.
Israel/Iran conflict remains a volatile undercurrent in the oil market
In addition, the risk of a full-blown war between Israel and Iran remains a persistent and increasingly volatile undercurrent in the oil market. While not an immediate base-case scenario, it is a geopolitical risk the market cannot afford to fully discount. Tensions have steadily escalated over Iran’s nuclear ambitions, and Israel along with the U.S. have long maintained that they will not allow Iran to develop a nuclear weapon—a red line that may drive Israel toward unilateral military action if diplomacy fails.This risk is further amplified by Israel’s current political climate, where Prime Minister Benjamin Netanyahu’s government faces growing domestic pressure and may see a decisive foreign policy move—such as a strike on Iranian nuclear facilities—as a way to shift the political narrative or consolidate support. On the other side, Iran has vowed to retaliate forcefully if its nuclear infrastructure is attacked, potentially targeting US or Israeli assets directly or through its regional proxy networks.
As markets continue to navigate this web of opposing pressures, volatility remains elevated, and traders will be closely watching diplomatic developments, demand signals, and the next steps from OPEC+ for clearer direction. Overall, its our opinion that a price above USD 70 Brent is unlikely to be sustained into the autumn months once we go past the peak summer demand season, and OPEC+ production increases are being felt, however with the risk of a Middle East disruption once again hanging over the market, fundamental driven short-selling appetite is likely to remain muted for now.Key takeaways from weekly EIA report
EIA's weekly update showed a surprise 3.64 million barrels reduction in crude stockpiles, while gasoline and distillate stocks both rose with refineries processing the most crude since December 2019 to meet summer demand, leading to a drop in exports to an April low at 3.3 million barrels per day. Some concerns about demand arose after implied gasoline demand on a four-week averaged basis stayed at a five-year seasonal low, while distillates, like diesel demand (apart from 2020) fell to an all-time seasonal low.| Related articles/content |
|---|
| 10 June 2025: COT Report: Metals, energy demand offset by broad Ag selling 6 June 2025: Commodities weekly Gold stalls spotlight shifts to cheaper silver and platinum 4 June 2025: Crude oil holds firm despite mounting supply glut fears 3 June 2025: Gold and silver break key levels as copper eyes tariff decision 2 June 2025: COT Report: Speculators sold crude ahead of OPEC hike 28 May 2025: Breakout or breakdown Gold silver and platinum face pivotal resistance zones 26 May 2025: COT Report: Hedge funds return to gold; elevated grains short 23 May 2025: Commodities weekly Diverging supply trends boost platinum weigh on crude 21 May 2025: Israel attack risks add modest risk premium to crude prices 20 May 2025: As gold pauses is platinum ready to shine for investors 19 May 2025: COT Report: Speculators show measured reaction to trade truce 16 May 2025: Commodities Weekly - Gold retreats Procyclicals rise amid trade truce optimism 14 May 2025: Crude stays range-bound despite latest tariff-truce bounce 13 May 2025: Gold holds steady as tariff truce sparks silver rebound 12 May 2025: COT Report: Broad risk reduction seen ahead of easing trade tensions 9 May 2025: Commodities weekly Sentiment improves as trade tensions cool before talks 8 May 2025: Copper market navigates tariff uncertainty amid tight global supply 7 May 2025: Agriculture markets diverge as trade war weather and speculators reshape landscape 6 May 2025: Crude climbs as market digests OPEC hike and shale slowdown risks 6 May 2025: Gold rises as Chinese demand rebounds post-holiday 5 May 2025: COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike 1 May 2025: Gold corrects sharply from record highs as Chinese demand pauses 29 April 2025: Copper navigates energy transition supply shocks and market turmoil 28 April 2025: COT Report: Continued gold selling; USD weakness drives record JPY long 25 April 2025: Commodities weekly Energy slump overshadows strength in gold and agriculture 23 April 2025: Blowout top leaves Gold in consolidation mode 22 April 2025: Commodities return Why allocation matters 16 April 2025: Whats next as gold hits our USD 3300 target 15 April 2025: COT Reports show hedge funds racing to cash post-Liberation Day 11 April 2025: Commodities weekly As chaos reigns whats next for markets 10 April 2025: YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025 Podcasts that include commodities focus: 6 June 2025: Silver rips as Musk-Trump bromance trips 28 May 2025: Nvidia to determine whether US stocks can achieve new highs 12 May 2025: As good as it gets on the trade news front 6 May 2025: Bears hang in at key levels as Palantir rides the retail whirlwind 23 April 2025: Trump going soft on tariffs versus the direction of travel. 11 April 2025: US and China are slipping into an economic war 4 April 2025: Markets melts down as recession risks go global 1 April 2025: Bracing for Liberation Day |
| More from the author |
|---|
|
Published by:
Ava