By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
Global oil markets stabilized to a certain extent as traders could remain cautious in the face of the uncertainty around the geopolitical developments in Eastern Europe. While potential progress in the peace talks could fuel downside risks for the market, the lack of clarity around the stance of the belligerents could leave the market on edge.
In this regard, a peace deal could induce an easing of sanctions on the Russian energy sector and drive higher volumes into the market, which could weigh on prices. However, a failure to strike a lasting peace could lead to additional tightening on Russian crude exports, which could limit downside risks at a time when the market is expecting an oil glut.
The IEA now projects that global supply growth, led by the US, Brazil and other non-OPEC producers, will outpace demand into 2026, leaving the market with a sizeable surplus and rising inventories. The surplus could potentially reach around 4 mb/d by 2026.
Over the short term, the API’s US crude inventory draw and stronger expectations of a Fed rate cut could help cushion the market. However, the fundamental bias could remain bearish and the uncertainty high.