Geopolitical factors have a strong but short-lived impact on the oil market. At first, Venezuela was a drag on oil prices, then Iran provided some support. However, neither country changed the market situation. Let's discuss this topic and make a trading plan for Brent.
The article covers the following subjects:
Major Takeaways
- Brent soared amid geopolitical woes.
- The US does not want oil prices to rise.
- OPEC believes the market is balanced.
- Brent can be sold if the price settles below $64.35.
Weekly Fundamental Forecast for Brent
Donald Trump's attacks on Iran in connection with the mass killings of protesters have increased the risk of a US military invasion, raised the geopolitical risk premium, and pushed Brent prices to three-month highs. Fears of supply disruptions outweighed the likelihood of increased production in the country due to regime change. However, as soon as the US president realized he had gone too far, Brent crude prices plummeted.
The time to buy is when there is blood in the streets, or sell, depending on the current trend. The oil market is definitely bearish, as evidenced by the 3.4 million increase in US crude oil reserves, the highest level since November, due to the supply of Venezuelan oil to the United States.
According to Enverus estimates, oil production in Venezuela will increase by 50% to 1.5 million bpd by 2035. Although this is a significant improvement, it is still far from the 4 million bpd achieved in the 1970s. Despite Donald Trump's calls for American oil companies to increase investment in Venezuela, adverse market conditions are preventing them from doing so.
Oil Production in Venezuela and Iran
Source: TradingView.
With production of 3.2 million bpd and exports of 2 million bpd, Iran is a much larger oil producer. It exports 90% of its oil to China. Market fears centered on the closure of the Strait of Hormuz in response to US military action. These concerns led to the spread between Brent and WTI widening to its highest level since October 2024. At that time, a series of mutual attacks between Jerusalem and Tehran also drove up risk premiums.
WTI-Brent Spread
Source: Bloomberg.
Geopolitical turmoil represents a significant but short-term threat to the oil market. Donald Trump understands perfectly well the implications of a new conflict in the Middle East. The futures market increased bets on Brent rising to $80 per barrel. In this case, US inflation would increase significantly, which is not part of the US administration's plans. That is why the US leader said that he was told the killings in Iran had stopped. Against this backdrop, oil prices declined significantly.
OPEC+ forecasts of demand growth of 1.3 million bpd in 2026, roughly the same as in 2025, were more likely to confuse investors than to serve as grounds for purchases. JP Morgan and the IEA see a decline to 800–900 thousand bpd, suggesting the bearish trend in oil will likely persist. The market is more likely to be in surplus than in balance.
Weekly Trading Plan for Brent
The rise in oil prices amid events in Iran provided an opportunity to sell crude. While Brent prices remain below $64.35 per barrel, short positions can be considered.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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