Bousso: ROI-Oil is not able to break through the range of its current price because it needs a shock from Iran's supply, but a tough talk.
Even though oil prices rose 15% in January on the back of fears that a new U.S. attack on Iran was imminent, they remain in a narrow range. A well-supplied crude oil market will not allow for much more price increase from either side. It would take a massive action to?have a lasting impact on the global balance of supply and demand.
Brent crude futures are at their highest level since July last year. This puts the global benchmark in line for its largest monthly gain since January 20, 2022 when Russian forces prepared to invade Ukraine. A series of major disruptions has collided and escalating risk in the Middle East. The first was the decline in Venezuelan exports after the U.S. arrested Nicolas Maduro. According to Kpler data analytics, Caracas's crude oil shipments in January averaged 605,000 barrels a day, which is below the average for 2025 of 780,000 barrels a day. The country is struggling to revive its industry. A power failure in Kazakhstan halted production at the Tengiz oil field, one of the largest in the world, on January 18. Although operations have resumed, it is unlikely that the field will return to its production level of over 900,000. bpd prior to the outage before mid-February. The U.S. is still recovering from a drop of up to 2,000,000 bpd, or 15% of the national supply during last weekend's severe storm.
Some outages may last for several weeks or months.
The combined effect has helped lift prices. However, gains have been capped due to rising production in other parts?of the global?market including key OPEC producers. This surge in supply in recent months has pushed prices down.
In fact, the International Energy Agency predicts a massive oversupply of 3.7 million bpd in 2026. This projection is supported by the growing onshore and off-shore inventories.
IRAN TENSIONS ARE ON THE RISE President Donald Trump’s increasing explicit threats to attack Iran, along with the massive U.S. Military buildup in the area, has added upward pressure on oil prices in recent weeks.
It is impossible to predict what will happen. Will Washington attack Iran? How forcefully will Washington attack Iran? How would Tehran respond?
The stakes on the oil market are high.
Iran, OPEC’s fourth largest producer, pumped 3.3 millions bpd by 2025. This is roughly 3% global crude. Tehran has threatened to retaliate if the U.S. strikes, and this includes hitting neighboring states. This raises the possibility of wider disruptions in a region where energy exports account for nearly 20% of global demand.
The markets are certainly on edge. The CBOE crude index volatility, which measures market expectations of volatility using a variety of put and call option, rose sharply on Thursday from 30 to 50, its highest level since the Israel-Iran War last June when it reached 77.
GEOPOLITICAL RISK PREMIUM
The recent physical outages, coupled with the rising Middle East tensions, creates a bullish background for crude. Why hasn't this been enough to allow Brent to break free of the $60-$80 per barrel range that it has been stuck in for almost two years?
Investors are pricing only a modest geopolitical premium given the global glut of supply.
Remember that prices were also restricted to this narrow range in the past year despite the Israel-Iran War, a wave Ukrainian attacks on Russian Oil Facilities, and Trump's "Liberation Day tariff" announcement.
What would it take for prices to reach triple-digits? This would require a major regional conflagration to disrupt flows.
The oil market will not react as quickly to political tensions if they are not addressed. Traders today need to see enough supply losses to offset the overhang of supply - which is a tall order.
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(source: Reuters)
