KEY POINTS:
- Oil fell to the lowest level since 2021 yesterday following soft US jobs report
- A major breakdown was avoided as Trump ordered a total blockade on sanctioned Venezuelan oil tankers
- Prices rose further this morning following the news that the US was reading new Russia sanctions if Putin rejected the peace deal
GEOPOLITICAL NEWS:
Crude oil yesterday fell to the lowest level since 2021 on demand fears following the soft US jobs report where the unemployment rate jumped to 4.6% vs 4.4% prior.
We avoided a major breakdown as Trump overnight ordered a total blockade on sanctioned Venezuelan oil tankers. Crude oil got a boost from the news on tighter supply expectations.
This morning, prices rose further following the news that the US was readying new Russia sanctions if Putin rejected the peace deal. This is another negative news for the supply side and therefore a positive catalyst for higher oil prices.
MARKET REACTION:
In the chart below, we can see the two recent catalysts that helped crude oil to recover all yesterday’s losses. In the bigger picture, the market has been mostly rangebound with a negative skew on cautious demand outlook and higher supply fears as OPEC+ kept increasing output.
Looking ahead, if we get to a point where central banks are forced to hike rates again in 2026, then the demand outlook could worsen further and weigh on crude oil prices. On the other hand, if central banks continue to ease and economic data shows an improvement in labour markets and growth, then we will likely see oil trending higher.
OPEC+ increases in supply despite the weakening in global demand due to US tariffs has also been a key factor in oil weakness this year. A more “hawkish” stance from the cartel in 2026 should add further support.
This article was written by Giuseppe Dellamotta at investinglive.com.