As with XAUUSD, April
started with optimism for the oil market, as Brent crude oil rose above $75 per
barrel for the first time since February 21. The driver remains the same as in
recent weeks: rising geopolitical risks.
Traders are increasingly hedging against the possibility
that Trump will make good on his threats to attack Iran and impose sanctions if
Tehran fails to reach an agreement on its nuclear program. Tensions rose
further after Iran’s Supreme Leader vowed a forceful response to any
provocation.
Adding to the uncertainty, the U.S. president recently
threatened to impose new tariffs, specifically a 25% duty on all goods imported
into the U.S. by buyers of Russian oil, unless Moscow agrees to end the
conflict in Ukraine. Such a move could pressure major
importers such as China and India.
Will we soon see $80 per barrel?
According to the latest report from the International
Energy Agency, strong production growth in the Americas, the end of OPEC+
supply cuts, and weaker-than-expected
demand due to economic difficulties could result in an oil
surplus of 600,000 barrels per day in 2025.
Meanwhile, as of April 3, eight OPEC+ member countries have
begun to gradually increase oil production after a prolonged period of
voluntary cuts. The staggered return of 2.2 million barrels per day will run
from April 2025 to September 2026.
As for the increased interest among options traders in
mid-March in June contracts with a strike price of $100 per barrel, it does not
necessarily mean that they expect oil to reach that level. Rather, they are
hedging against that scenario, considering it a realistic possibility.
Currently, there are no compelling fundamental reasons for
a sharp rise in oil prices. However, nothing can be ruled out. Precisely for
this reason, traders are taking precautions.
What now?
In the short term, volatility will likely continue, driven
by Trump’s public comments and incoming macroeconomic data. In that regard,
China’s latest business activity data provided some support for oil prices: the
PMI manufacturing (50.5) and services (50.8) indices beat consensus forecasts
in March.
The market’s attention now turns to U.S. data, including
the JOLTS job openings report. Last, let’s not forget tariffs. If markets
perceive trade wars as threatening the global economy, oil demand could be
affected, and traders will react accordingly. Fasten your seat belts: it looks
like the next few days will be interesting.
This article was written by FL Contributors at www.forexlive.com.