Crude Prices Sink as Geopolitical Risks Ease and US Supplies Increase

Core Insights - Crude oil prices are experiencing volatility due to geopolitical tensions, particularly involving Iran and Ukraine, which are impacting supply dynamics and market sentiment [2][4][5]. Geopolitical Factors - Kazakhstan's oil production has been curtailed by approximately 900,000 barrels per day (bpd) due to power generator fires at the Tengiz and Korolev oil fields, affecting the Caspian Pipeline Consortium [1]. - Unrest in Iran, where security forces have killed thousands of protesters, poses a risk to the country's crude production of over 3 million bpd, especially if protests escalate and lead to U.S. military action [2]. - The U.S. is reportedly considering military options against Iran, which could further destabilize the region and impact oil prices [3]. Market Reactions - Crude prices fell after Ukrainian President Zelenskiy indicated progress in peace talks with Russia, which could lead to an end of sanctions on Russian crude and increase global oil supplies [4][5]. - The Energy Information Administration (EIA) reported an unexpected rise in U.S. crude inventories by 3.6 million barrels, alongside a significant increase in gasoline supplies, contributing to bearish sentiment in the market [10]. Production and Supply Dynamics - The International Energy Agency (IEA) revised its 2026 global crude surplus estimate down to 3.7 million bpd, while the EIA raised its U.S. crude production estimate to 13.59 million bpd [6]. - OPEC+ has decided to pause production increases in Q1 2026, maintaining a cautious approach amid emerging global oil surpluses [8]. - Ukrainian attacks on Russian refineries and tankers have limited Russia's crude oil export capabilities, further constraining global oil supplies [9]. Inventory and Rig Count - U.S. crude oil inventories as of January 16 were reported to be 2.5% below the seasonal 5-year average, while gasoline inventories were 5.0% above the average [11]. - The number of active U.S. oil rigs increased by 1 to 410 rigs, indicating a slight recovery from a 4.25-year low [12].