Oil prices have recovered from earlier losses to trade with marginal change, as the market assesses the impact of US President Donald Trump’s recent threat to impose tariffs on some European nations following reports he may seek to annex Greenland. Concurrently, tensions surrounding Iran appear to have eased, contributing to market stabilisation after a period of volatility. Brent crude is currently trading above $US64 a barrel. Initial market reactions to Trump’s tariff announcement saw stocks decline, while precious metals such as gold and silver saw a rise as investors sought safe-haven assets.
Adding to geopolitical factors, Iranian Supreme Leader Ayatollah Ali Khamenei addressed the public, acknowledging a significant number of deaths during recent anti-government demonstrations. While placing blame on the US and Israel for inciting unrest, Khamenei stated that Iran is committed to avoiding war. These comments come at a time when the oil market remains sensitive to potential supply disruptions from the Middle East region.
Overall, the oil market has been facing downward pressure due to concerns about supply exceeding demand. The International Energy Agency has predicted a global supply surplus of over 3.8 million barrels per day this year. This oversupply has counteracted supply concerns from Kazakhstan’s largest oil producer, which temporarily suspended production at the Tengiz and Korolev fields as a safety measure following fires at power generators.
Despite this, short-term market indicators suggest some tightness in the physical market. The premium on Brent’s nearest contract over futures for the following month has approximately doubled since the beginning of the year, reaching about 70¢ a barrel. ING Groep NV analysts noted that, despite pressure on overall prices, the prompt ICE Brent timespread remains firm, indicating ongoing demand in the spot physical market.
