Oil in panic: how politics is breaking the global trend

XBR/USD

Key zone: 67.50-69.50

Buy: 70.00(on a pullback after retesting the 68.50 level); target 71.50-73.50; StopLoss 69.30

Sell: 67.00(on strong negative fundamentals); target 65.00-63.50; StopLoss 67.70

During periods of financial and political crises, market sentiment traditionally outweighs fundamental factors. Over the past two years, global oil supply has consistently exceeded demand, forming the basis for a medium-term bearish scenario.

According to estimates by the International Energy Agency, in 2025 global oil inventories increased by a record 477 million barrels due to expanded production in the United States, Brazil, other countries, and within OPEC+. This is equivalent to an additional 1.3 million barrels per day. Despite the fact that inventory levels in key regions have started to decline, they still remain above last year’s levels and above the five-year average.

In search of equilibrium, the market chose the bearish scenario, but politics actively intervened in the situation.

The geopolitical premium in prices for major oil benchmarks is currently estimated in the range of $5–10 per barrel, while geopolitics itself remains the main driver of price formation.

If Donald Trump manages to achieve a peace agreement with Russia and a nuclear deal with Iran, a decline in prices below the $60 per barrel level becomes almost inevitable. However, until this scenario is realized, a high probability of supply disruptions remains due to sanctions pressure on Russia or potential military actions by the United States against Iran, which continues to support price growth.

Reminder:

On the eve, Iran launched large-scale military exercises in the Strait of Hormuz, while at the same time a second U.S. aircraft carrier headed toward the Persian Gulf. This increases the risks of disrupting any negotiation processes. Formally, the diplomatic path remains possible, but its probability looks minimal.

According to Bloomberg, in the event that Iran blocks the Strait of Hormuz, the price of Brent could rise to $108 per barrel. The tightening of sanctions against Russia forces buyers of its oil to seek alternative sources, which additionally increases demand for other grades and intensifies price pressure.

Let us note several factors:

• In February, China plans to purchase a record volume of Russian oil, which became the result of redirected discounted flows from India, which significantly reduced imports after agreements with the United States.
• Independent Chinese refineries remain the world’s largest consumers of crude from Russia, Iran, and Venezuela, while supplies from all these regions are becoming increasingly complicated. At present, the Russian ESPO blend with March delivery is trading at a discount of $8–9 per barrel to Brent, while the comparable Iranian grade trades at a discount of $10–11.
• Saudi oil sales to China increased in March after the Kingdom lowered the price of its main Arab Light grade to the lowest level in the past five years due to concerns about oversupply. Saudi Aramco will deliver between 56 and 57 million barrels, which is 8 million more than February volumes.
• Additional volumes will also be received by refineries in India, South Korea, and Japan under long-term contracts. Saudi oil has effectively displaced competitors from the Asian spot market.
• Oil exports from Iraq may also increase next month. Unlike Saudi Arabia, which sells crude mainly through long-term agreements, Iraq and several other countries sell a significant share of volumes via the spot market, which increases supply flexibility.
• Supplies of Venezuelan oil are currently controlled by the United States and carried out through the largest international traders Vitol and Trafigura, as a result of which discounts to Brent have narrowed. At the same time, already agreed large shipments to China must be executed in full, since large-scale international conflicts are not part of Trump’s current political agenda.

OPEC+ is also ready to take advantage of favorable market conditions and begin increasing production from April after a pause in the first quarter. According to estimates by Kpler, the remaining part of voluntary cuts amounting to 1.66 million barrels per day will be fully offset over the next six months.

The most realistic political scenario assumes that agreements with Iran and within the Russia–Ukraine conflict will be reached no earlier than June of the current year. Until real diplomatic agreements emerge, the market will remain in a regime of elevated volatility.

The market should focus on Brent range around $60–62 per barrel and WTI prices slightly above $63, and also take into account a decline in margins on diesel fuel and gasoline within the range of $5–7.

So we act wisely and avoid unnecessary risks.

Profits to y’all!