Oil Prices Decline Under Economic and Geopolitical Pressures: Will the Drop Continue?

Negative Factors Weigh on Prices as Speculators Bet on Further Decline

Oil prices took a sharp dive this week, breaking out of a stable trading range that had persisted for months,
reaching their lowest levels in three years.
With increasing economic and geopolitical pressures,
investors are questioning whether this decline will persist in the near future.

Topic

Market Pressures

Oil Prices

Market Pressures

Growing Pressures Affect the Market

Several key factors have combined to create one of the most bearish periods in modern oil market history.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies unexpectedly announced plans to increase production,
despite Brent crude trading around $70 per barrel—a significant shift from the alliance’s previous efforts to support prices.

At the same time, trade threats from U.S. President Donald Trump continue to pressure markets,
as he signals potential actions that could impact global oil demand.
Meanwhile, geopolitical tensions have somewhat eased after Russia expressed willingness to discuss a temporary ceasefire in Ukraine,
reducing supply-related risks.

Additionally, China, the world’s largest oil importer, has instructed its refineries to reduce production of key fuels such as gasoline and diesel,
reflecting shifting long-term demand expectations.
These factors collectively pushed Brent crude futures below their previous range of $70 to $85 per barrel,
strengthening expectations of further decline.

Hedge Funds Cut Long Positions

In another sign of growing bets on lower prices, hedge funds have reduced
their long positions in West Texas Intermediate (WTI) crude by 2,266 contracts,
bringing the total to 172,576 contracts—the lowest level since 2010,
according to the U.S. Commodity Futures Trading Commission.

For Brent crude, the decline was even more significant,
with long positions dropping by 41,583 contracts—the largest reduction since July—according to data from the Intercontinental Exchange in Europe.

Cayler Capital, a commodity trading advisory firm focused on oil,
stated that “Trump is pressuring OPEC to increase production while simultaneously working to ease tensions between Russia and Ukraine.
” The firm added that “the net result is a bearish shift in the oil sector, with prices declining amid ongoing uncertainty.”

Wall Street Lowers Oil Price Forecasts

With mounting bearish factors, major investment banks have revised their oil price forecasts downward.
Morgan Stanley now expects Brent crude to average $70 per barrel this year, a reduction of $5 from its previous estimate.

Goldman Sachs has warned that prices could fall below the $70-$85 per barrel range,
while JPMorgan Chase went further, predicting a drop to $50 per barrel at an energy conference in London.
Similarly, Citigroup forecasted Brent crude to reach $60 per barrel.

Oil Prices

Middle Eastern Oil Prices Decline

Signs of weakness have emerged in the Middle Eastern crude market,
which had remained resilient following U.S. sanctions on Russian and Iranian oil Prices
for these grades have fallen relative to the Dubai benchmark due to decreased demand for alternative shipments.

Additionally, the premium on Murban crude, a key grade for Asian buyers, has shrunk relative to Dubai crude,
as demand in Asian markets continues to weaken—especially after China’s crude imports declined by about 5% in the first two months of the year.

Meanwhile, global supply pressures are intensifying,
with Kazakhstan set to increase oil exports this month following an expansion of one of its largest fields.
The International Energy Agency (IEA) also expects a market surplus this year, even before OPEC+’s latest policy adjustments.

Iran Risks and Market Impact

Despite the bearish outlook, some factors could limit further declines in oil prices.
The Trump administration continues its “maximum pressure” policy on Iran,
with U.S. Treasury Secretary stating that the goal is to cut Iranian oil flows by more than 90%.
The U.S. is also considering revoking Chevron’s license to pump and sell Venezuelan oil,
which could remove 200,000 barrels per day from the market.

With rising tensions between Israel and Hamas, markets remain on edge for potential disruptions in production.
Additionally, the U.S. Department of Energy is seeking $20 billion to refill the Strategic Petroleum Reserve, which could boost oil demand.

Trump’s Policies and Market Impact

Beyond supply and demand dynamics, the broader impact of Trump’s economic policies is reflected in oil markets.
U.S. stock markets have dropped about 6% from their peak in recent weeks,
while consumer confidence has fallen at the sharpest rate since 2021, increasing financial instability.

Aldo Spanger, chief commodity strategist at BNP Paribas, stated, “Trump’s tariffs are negatively impacting economic growth,
and there is growing concern over a slowdown in the U.S. economy.”
He added, “These conditions reinforce bearish bets on oil prices,
making it unlikely for investors to take a buying position at this stage.”

Amid these factors, oil markets remain volatile, with future trends largely dependent on global economic developments
and geopolitical shifts, keeping investors on high alert.

Oil Prices Decline Under Economic and Geopolitical Pressures

Oil Prices Decline Under Economic and Geopolitical Pressures

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