Geopolitical Risk Pushes Crude Oil Prices Higher

Core Insights - Crude oil and gasoline prices are experiencing a significant rally, with crude reaching a 2.5-month high and gasoline a 5-week high, driven by geopolitical tensions in Iran that threaten crude supplies [2][3] - A bearish EIA inventory report indicated an increase in crude and gasoline supplies, which caused a slight pullback in crude prices from their peak levels [2] Geopolitical Factors - Unrest in Iran, fueled by protests against government policies leading to economic collapse, is contributing to rising crude prices, with potential disruptions to Iran's production of over 3 million bpd if the situation escalates [3] - The U.S. has advised some personnel to leave the Al Udeid Air base in Qatar due to concerns over Iranian retaliatory actions, which could further impact oil supply dynamics [3] Supply Chain Disruptions - Drone attacks on oil tankers near the Caspian Pipeline Consortium terminal have reduced crude loadings by nearly half to around 900,000 bpd, providing additional support for crude prices [4] - Crude oil stored on stationary tankers has decreased by 0.3% week-over-week, indicating a tightening supply situation [4] Demand Dynamics - Chinese crude demand is strengthening, with December imports projected to rise by 10% month-over-month to a record 12.2 million bpd as the country rebuilds its crude inventories [5] OPEC+ Production Strategy - OPEC+ has decided to maintain its pause on production increases in Q1 of 2026, following a previous announcement to raise production by 137,000 bpd in December [6] - The International Energy Agency (IEA) forecasts a record global oil surplus of 4.0 million bpd for 2026, while OPEC+ aims to restore 2.2 million bpd of production cuts made in early 2024, with 1.2 million bpd still to be restored [6] - OPEC's crude production increased by 40,000 bpd to 29.03 million bpd in December [6]