By – Joseph Dahrieh, Managing Principal at Tickmill
Crude oil futures continue to regain ground from their January decline, supported by concerns over tightening supplies. Russian oil production in January fell 16,000 barrels per day below its OPEC+ quota, alleviating fears of an oversupply. Additionally, disruptions in Russian oil shipments to major importers like China and India, compounded by sanctions on Russian tankers and producers, have intensified concerns over supply shortages. This environment could support global crude prices as market participants anticipate continued tightness in supply, suggesting a cautiously bullish short-term outlook if disruptions persist.
However, gains are being moderated by broader economic concerns, particularly escalating trade tensions. The U.S. recently imposed tariffs on steel and aluminum imports, while also introducing new tariffs on Chinese goods, leading to retaliatory actions from Beijing. These moves raise the risk of a trade war, which could dampen global growth and reduce energy demand. If the trade dispute worsens, it may offset supply-side concerns, resulting in a bearish outlook for crude oil in the medium term.
Meanwhile, U.S. inventory data are being closely monitored and could impact the market’s direction. A build-up in stockpiles could indicate weaker demand, curbing sustainable price rallies.