Oil Prices Slide as Global Supply Signals Strengthen

Global oil prices fell sharply as geopolitical fears surrounding Iran temporarily subsided, while fresh supply-side data from the United States, Venezuela and the Middle East reinforced expectations of a more balanced, and potentially oversupplied, market in the near term.

Crude benchmarks dropped by more than 3% after US President Donald Trump indicated that the violent suppression of protests in Iran appeared to be easing. His remarks, which suggested an absence of imminent large-scale executions or immediate military escalation, softened market anxiety over possible disruptions to Iranian oil flows. As a result, the geopolitical risk premium that had built up earlier in the week began to unwind.

Brent crude retreated to the mid-$64 per barrel range, while US West Texas Intermediate slipped below $60, both reversing gains that had pushed prices to multi-month highs only a day earlier. Analysts noted that while tensions in the Middle East remain unresolved, the immediate threat of supply disruption has diminished, reducing speculative pressure on prices.

Additional downward momentum came from US inventory data, which showed a larger-than-expected increase in both crude oil and petrol stocks. The rise pointed to softer short-term demand and reinforced concerns that supply growth may be outpacing consumption, particularly in mature markets.

Storage and Demand Signals Paint a Mixed Outlook

Beyond the US, global supply signals continued to weigh on sentiment. Venezuela has reportedly begun rolling back production cuts introduced under US sanctions, with crude exports gradually resuming. At the same time, OPEC maintained its outlook that oil demand growth in 2027 will broadly mirror current trends, while its projections suggest global supply and demand could remain close to balance in 2026, a view that contrasts with more bearish forecasts predicting excess supply.

China provided a partial counterweight on the demand side. Government data showed a strong year-on-year increase in December crude imports, with daily volumes reaching record levels. Total imports for 2025 also posted solid growth, underscoring China’s continued role as a key driver of global oil demand.

Meanwhile, storage data from the Middle East highlighted evolving product dynamics. Oil product inventories at Fujairah (emirate on the eastern coast of the United Arab Emirates (UAE)), one of the world’s most important bunkering hubs, rose for a second consecutive week. The increase was driven primarily by a surge in heavy distillates, used mainly for shipping and power generation, marking their first rise in over a month. Middle distillates such as jet fuel and diesel also climbed, while lighter products including petrol and naphtha declined from recent highs.

Fuel oil prices in Fujairah reflected these shifts, with low-sulphur marine fuel maintaining a premium over high-sulphur alternatives, pointing to ongoing adjustments in shipping fuel demand and regulatory compliance.

Taken together, easing geopolitical fears, rising inventories and signs of resilient supply have tilted oil markets towards caution. While volatility is likely to persist given unresolved tensions in the Middle East, recent developments suggest that the immediate upside risks to prices have moderated, at least in the short term.

While the immediate shock of geopolitical escalation has eased, oil markets remain caught between fragile political stability and increasingly visible supply-side pressures. Rising inventories, the return of sanctioned barrels, and mixed demand signals suggest that price volatility is far from over. Any renewed deterioration in Middle Eastern security or unexpected supply disruptions could quickly restore risk premiums, leaving global energy markets highly sensitive to political developments and policy shifts in the months ahead.

Written By 

Cole Jackson

Lead Associate at BRICS+ Consulting Group 

Chinese & South America Specialist