By Rania Gule, Senior Market Analyst at XS.com – MENA
The recent movements in the oil market clearly reflect the return of geopolitics as the primary driver of prices after a period dominated by purely economic indicators. The rise in crude oil above the $56.00 per barrel level, and its advance to around $55.75 during the Asian trading session, cannot be viewed in isolation from Donald Trump’s decision to impose a blockade on sanctioned Venezuelan oil tankers. This move has revived scenarios of supply disruptions that have historically supported oil prices in previous phases. In my view, this sharp single-day increase of around 1.25% highlights the market’s heightened sensitivity to any signals related to supply, especially in a global environment still characterized by a fragile balance between supply and demand.
Accordingly, I believe that Venezuela, despite its diminished relative weight in the global oil market compared with past decades, remains a key geopolitical chokepoint. The blockade imposed on its oil tankers does not only imply a direct reduction in Venezuelan exports, but also sends a strong message to the market that the United States is prepared to use more stringent tools in managing the energy and sanctions file. This psychological dimension, in my opinion, is no less important than the quantitative impact, as traders often price in future risks before they materialize. Therefore, I expect this factor to continue providing a support base for crude oil prices in the short term, as long as escalation risks remain on the table.
In addition to the geopolitical factor, I believe that U.S. inventory data has added further credibility to the recent price gains. The announcement by the American Petroleum Institute that U.S. crude oil inventories fell by 9.3 million barrels in a single week, compared with market expectations of a decline of no more than 2.2 million barrels, is a clear signal that actual demand is stronger than previously estimated. From my perspective, this wide gap between expectations and outcomes reflects either an improvement in consumption momentum or a contraction in supply, and in both cases it represents a supportive factor for prices. I also believe that the market has not yet fully absorbed the impact of this sharp drawdown, particularly if it is later confirmed by data from the U.S. Energy Information Administration.
Therefore, I see the convergence of geopolitical tensions with declining inventories creating what could be described as a “confluence of bullish factors,” a scenario that often pushes prices to test higher levels over a short period of time. As a result, I expect crude oil in the coming weeks to attempt to consolidate above the $55 per barrel level, with the potential to target the $57–58 range if current indicators remain unchanged. At the same time, however, I believe that this upward path remains fragile and vulnerable to a swift reversal should countervailing news emerge.
One of these countervailing factors lies in developments related to the war in Eastern Europe. Statements by Ukrainian President Volodymyr Zelenskyy that talks with the United States aimed at ending the war with Russia were “very constructive” carry the potential for a broader easing of geopolitical tensions. In my view, any genuine progress toward a peace agreement could weigh negatively on oil prices by reducing the geopolitical risk premium and opening the door to more stable energy flows, whether from Russia or from other markets previously affected by sanctions and restrictions.
Against this backdrop, I believe the oil market is currently standing at a sensitive crossroads. In the first scenario, the continuation of the blockade on Venezuelan tankers combined with confirmation of declining U.S. inventories could push prices into a new upward wave driven by speculation and fears of supply shortages. In the second scenario, any diplomatic breakthrough in the Ukraine file, or broader signals of political de-escalation, could quickly pull prices back toward lower ranges, possibly around $52–53 per barrel. Personally, I tend to favor a high-volatility scenario, where prices remain supported but without a strong directional push, pending greater clarity on both the political and economic fronts.
In conclusion, I believe that oil at this stage is no longer priced solely on traditional supply-and-demand dynamics, but has become hostage to a delicate balance between politics, inventories, and market psychology. My baseline expectation is for crude oil to remain in a sideways, mildly bullish trajectory in the near term, while investors and traders should exercise a high degree of caution, as any unexpected political statement or inventory report could be enough to change the direction in an instant.