Oil prices have continued their steady rise this week, with West Texas Intermediate (WTI) crude climbing 0.4% to settle just under US$70 a barrel. The gain reflects a combination of tightening near-term supply, improved US economic data, and geopolitical tensions, even as trade-related risks remain a drag on future demand.
Crude inventories in the US unexpectedly fell by 3.34 million barrels last week, according to EIA data, marking the lowest stockpile level in a month and helping to allay oversupply concerns. That data, coupled with a weaker US dollar and stronger-than-expected GDP and jobs figures, has given crude additional support.
But the bigger story behind oil’s resilience may lie in the growing geopolitical risks stemming from US foreign policy. President Trump has taken an aggressive stance on oil-producing nations—imposing 25% tariffs on Venezuelan crude and sanctioning a China-based refinery and other entities linked to Iranian oil exports. Reports suggest that India’s Reliance Industries may halt imports from Venezuela following the new US tariffs, a move that could further constrain global supply.
Trump has also given Iran a two-month deadline to renegotiate its nuclear deal, with analysts warning that a full-blown “maximum pressure” campaign could remove up to 1.5 million barrels per day of Iranian crude from the global market.
Meanwhile, in the Middle East, escalating violence is fuelling supply disruption fears. Israel has resumed airstrikes in Gaza and deployed troops in Syria, while the US has intensified strikes against Houthi rebels in Yemen. Defence Secretary Hegseth described the US campaign as “unrelenting,” further underscoring the potential risk to Red Sea shipping routes.
However, rising supply elsewhere has kept a lid on oil’s rally. OPEC+ plans to gradually restore 2.2 million barrels per day of previously curtailed output starting in April, and Russian oil product exports recently hit a one-year high. Despite US sanctions on Russian exporters like Gazprom Neft and Surgutneftgas, recent tracking data showed Russian crude exports still averaging over 3 million barrels per day.
Compounding the uncertainty, the Central Bank of Russia warned of a prolonged slump in oil prices, citing the potential for increased US and non-OPEC output. Yet this may not materialise. Shale executives surveyed by the Dallas Fed expressed little interest in ramping up production at current prices, noting that $75–$80 per barrel is the threshold for new activity. They also criticised Trump’s “energy dominance” rhetoric, saying it clashes with commercial reality.
The Permian Basin—the engine of US shale growth—faces its own challenges. Analysts warn that drilling in lower-quality zones is leading to more water and gas, and less oil. Although output is still climbing, growth is slowing, with this year’s increase likely to be the smallest since the pandemic.
In China, demand appears to be cooling. Customs data showed a 1.9% year-on-year decline in crude imports for 2024, a bearish signal for the world’s largest oil importer.
