Geopolitics saves Crude Oil
- Asian demand is making the black gold market more bullish than last year.
- The fate of Brent depends on the outcome of negotiations between the US and Iran on the one hand, and Russia and Ukraine on the other.
Brent bulls believe that sooner or later, Russia and Iran will reduce production and exports of Crude. This will lead to price increases. The bears are convinced of the opposite: thanks to discounts, barrels of oil will be absorbed by buyers, most likely China. At the same time, the negotiation processes between Washington and Tehran on the one hand, and Moscow and Kyiv on the other, are of key importance.
According to a Bloomberg insider, Russian oil production did indeed decline for the second month in a row to 9.28 million bpd in January. This is approximately 300,000 bpd below OPEC+ quotas. Nevertheless, exports rose to 3.39 million bpd in the week ending February 15th. In the first half of the month, deliveries to China jumped to more than 2 million bpd. According to Kpler, they are being redirected from India.
Overall, Asian demand for oil continues to grow rapidly. The company expects record growth in imports to China, India and other countries in the region to 28.51 bpd in February. This growth could lead to a smaller market surplus than previously expected. This is especially true given the supply disruptions that have occurred, including those caused by sanctions.
Thus, even without geopolitics, the situation looks less bearish than it did in 2025. Last year, according to the IEA, onshore reserves of Oil grew by 477 million barrels, or 1.3 million bpd. The main reason for this was increased production in the US, Brazil and OPEC+. At the same time, global demand remained healthy.
The market's attention is focused on the negotiations between Washington and Tehran, where each side has its own version of the truth. The Iranian Foreign Ministry claims that the basic terms of the agreement have been reached. This will allow sanctions to be lifted and war in the Middle East to be avoided. US Vice President DJ Vance, on the other hand, believes that Donald Trump's demands have not been met and that Tehran has two more weeks to do so.
Iran has an important trump card. It knows the peculiarities of the US president's negotiating tactics, which involve moving from threats to retreat. Moreover, a rise in Brent to $150 per barrel is not part of Donald Trump's plans, especially in the run-up to the midterm elections.
Author
Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.
