Global oil markets exhibited cautious movement on Monday, with Brent crude futures maintaining a position close to $68 per barrel. The benchmark contract recorded a modest gain of 0.6%, settling at $68.16. Concurrently, U.S. West Texas Intermediate (WTI) crude advanced by 43 cents to $63.32. Trading activity was notably subdued due to the U.S. Presidents' Day holiday, which resulted in no formal settlement for WTI and contributed to thinner-than-usual market liquidity.
Geopolitical Risk and Supply Dynamics Collide
Market participants are currently balancing two significant, opposing forces. The primary bullish factor stems from escalating geopolitical tensions, specifically surrounding the potential resumption of nuclear negotiations between the United States and Iran. A second round of talks is scheduled for Tuesday in Geneva. Washington has signaled a readiness for extended military engagement should diplomacy fail, while Tehran has issued retaliatory threats against U.S. bases. Analysts note that a credible breakthrough in these talks could swiftly erase the current risk premium baked into oil prices.
On the bearish side, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is reportedly considering restarting production increases as early as April. The group had previously paused output hikes during the first quarter. According to three sources within the coalition, eight member nations are scheduled to convene on March 1, a meeting that could determine output policy for the coming months. This potential influx of supply is creating headwinds for any sustained price rally.
Analyst Perspectives on Price Scenarios
The market outlook remains highly bifurcated, hinging directly on geopolitical outcomes. Analysts at SEB presented a stark range of possibilities, stating that heightened Iranian tensions could propel Brent prices toward $80 per barrel. Conversely, a de-escalation of the situation could see prices retreat to the $60 level. This uncertainty is fostering a hesitant trading environment.
Tamas Varga of PVM Oil Associates highlighted that concerns over potential supply disruptions linked to U.S.-Iran friction are a key factor providing underlying support to current price levels. The thin holiday liquidity has amplified the market's sensitivity to headlines, causing outsized reactions to incremental news flow.
Demand Signals and Inventory Concerns
While supply and geopolitics dominate the narrative, demand-side factors and inventory data are also in focus. Recent softer U.S. inflation figures were viewed favorably for the potential of lower interest rates, a positive for economic activity and oil demand. Dennis Kissler, senior vice president of trading at BOK Financial, acknowledged this but cautioned that the looming possibility of increased OPEC+ production presents a significant negative counterweight.
Refining activity in Asia shows mixed signals. Chinese refiners are poised to import a record volume of Russian crude oil this February, attracted by steep discounts, according to trade sources and ship-tracking data. In contrast, India has reportedly scaled back its purchases, likely due to diplomatic pressure from the United States.
Market Sentiment and Forward Outlook
Despite the recent uptick, traders have shown reluctance to aggressively chase price rallies. This wariness is driven by persistent market chatter about a potential supply glut later in the year if OPEC+ follows through on increasing production. The current price action reflects a market on edge, awaiting clearer signals from both the diplomatic front in Geneva and the producer group's meeting in March.
The previous trading session on Friday saw Brent add 23 cents to close at $67.75, demonstrating the delicate balance in the market. Looking ahead, the immediate direction for crude prices will likely be determined by the outcome of the U.S.-Iran talks and subsequent communication from OPEC+ members regarding their April production intentions. Should the geopolitical risk premium diminish and OPEC+ decide to boost supply, the market's focus would shift almost entirely to the strength of global demand, which has shown signs of variability across different regions.
