Jan 17: Crude oil prices have regained a bullish tone in recent sessions, driven by financial and geopolitical factors that continue to shape market sentiment. Both Brent and WTI advanced more than 1%, supported by position hedging ahead of the long weekend and by traders’ caution in the face of potential supply risks. This move pushed Brent to the $64.50 per barrel area and WTI to around $59.80 per barrel, marking a fourth consecutive week of gains.
The geopolitical component remains one of the main short-term catalysts. Although the market’s base case assumes that the likelihood of direct U.S. military action against Iran has decreased, a risk premium persists due to the possibility of escalation in the Middle East. The region hosts critical energy infrastructure, and any disruption to its stability can trigger sharp moves in international crude prices.
In particular, the Strait of Hormuz remains a critical chokepoint for global energy security. Nearly a quarter of the world’s seaborne crude oil trade passes through this route, making it a structural source of vulnerability for the market. Even the mere possibility of logistical disruptions or military tensions in the area is often enough to prompt hedging activity and lift risk premiums in futures contracts.
However, the outlook is not exclusively bullish. Alongside these tensions, expectations of increased supply from Venezuela are gaining traction, exerting downward pressure on prices. The gradual resumption of exports and the prospect of additional barrels entering the international market reinforce the perception that the global balance could tilt toward greater supply comfort in the coming months.
This dynamic is reinforced by a broader backdrop of relatively abundant global supply. Production discipline among some producers coexists with the resilience of U.S. output and inventory levels that, while not excessive, do not point to a scarcity scenario either. This balance limits the market’s ability to sustain prolonged rallies based solely on geopolitical risk.
Demand remains the primary source of structural uncertainty. The evolution of China’s economy remains critical to commodity consumption, and unless a clear and sustained acceleration in activity emerges, oil is unlikely to receive meaningful additional support from demand. Without a solid rebound in Asian demand, any rally tends to encounter resistance relatively quickly.
In this context, many market participants agree that Brent could remain within a relatively wide but defined range, between $57 and $67 per barrel. This range reflects the delicate balance between a lingering geopolitical premium and supply fundamentals that, for now, do not warrant a structural tightness scenario.
In conclusion, the crude oil market is going through a phase of contained tension, where emotional and geopolitical factors coexist with fundamentals that point to comfortable supply conditions. Recent gains appear to be driven more by hedging activity and risk management than by a structural shift in the global balance. As long as there are no actual supply disruptions or a strong rebound in demand, oil will likely continue to trade within established ranges, with bouts of headline-driven volatility but without a sustained long-term directional trend.