Skip to main content Exclusive news, data and analytics for financial market professionalsLearn more aboutRefinitiv Oil climbs as US-Iran tensions keep supply risks in focus February 26, 20261:57 AM UTCUpdated ago By Yuka Obayashi A view shows an oil pump jack outside Almetyevsk, in the Republic of Tatarstan, Russia July 14, 2025. REUTERS/Stringer Purchase Licensing Rights, opens new tab TOKYO, Feb 26 (Reuters) - Oil prices climbed on Thursday, hovering near seven-month highs, as investors gauged whether U. ...

Core Viewpoint - Oil prices have decreased as investors evaluate the ongoing tensions between the U.S. and Iran, despite a recent 4% increase in prices due to concerns over potential supply disruptions [1] Oil Price Movement - Brent futures fell by 12 cents (0.2%) to $70.23 per barrel, while U.S. West Texas Intermediate (WTI) crude decreased by 8 cents (0.1%) to $65.11 per barrel [1] - Both benchmarks had previously settled over 4% higher, marking their highest settlements since January 30 [1] U.S.-Iran Tensions - Tensions between Washington and Tehran remain elevated, but the consensus is that a full-scale armed conflict is unlikely, leading to a cautious approach among investors [1] - U.S. President Donald Trump is reportedly not in favor of a significant rise in crude prices, and any military action is expected to be limited to short-term air strikes [1] Diplomatic Efforts - Progress was made in talks between the U.S. and Iran in Geneva, although significant issues remain unresolved [1] - Iran is expected to provide more details in the coming weeks regarding the negotiations [1] Military Activity - Iran has announced plans for rocket launches in southern areas, while the U.S. has deployed warships near Iran [1] - U.S. Vice President JD Vance indicated that Washington is considering whether to continue diplomatic efforts or explore alternative options [1] Inventory Reports - U.S. crude, gasoline, and distillate inventories have decreased, contrary to expectations of a rise in crude stocks by 2.1 million barrels [1] - Official U.S. oil inventory reports from the Energy Information Administration are anticipated [1]

Market Overview - US stock futures showed a slight increase, with Dow Jones Industrial Average futures up 0.1%, S&P 500 futures up 0.2%, and Nasdaq 100 futures also up 0.2% as investors analyze the implications of recent jobs data on Federal Reserve policy and the US economy [1] - Oil prices surged over 2% following President Trump's order for a blockade of sanctioned tankers off Venezuela, with West Texas Intermediate futures trading above $56 per barrel and Brent futures exceeding $60 [2][11] Employment Data Insights - Wall Street is seeking clarity from the November jobs report, which revealed a higher-than-expected number of jobs added alongside the highest unemployment rate since 2021 [3] - Analysts caution that the jobs data may have a significant margin of error due to a prolonged government shutdown affecting data collection, leaving the odds of a January rate cut at 25% [4] Federal Reserve Commentary - Key Federal Reserve officials, including New York Fed's John Williams and Fed governor Chris Waller, are expected to provide insights on future monetary policy [5] - The market is anticipating the upcoming consumer inflation data, which is crucial for the Fed's rate decision next month [6] Technology Sector Focus - Investor interest in tech stocks remains strong, particularly with Micron Technology's quarterly results expected, as concerns about the AI trade continue to influence the sector [7] - Tesla's stock has positively impacted the tech sector, achieving its first record close in about a year due to growing enthusiasm over its robotaxi ambitions [8] Housing Market Update - Homebuilder Lennar's stock fell over 3% after reporting a decline in fourth-quarter profit, reflecting ongoing challenges in the housing market due to affordability issues [8]

Core Insights - Indian refiners continue to import Russian oil despite reports of halting imports, averaging 1.2 million barrels per day (b/d) in December, lower than the 1.75 million b/d average of 2025 [2] - Prices for Russia's Urals crude have decreased by $6 to $7 per barrel, but demand has improved, stabilizing the differential [3] - High freight costs are impacting Russian oil exports, with chartering costs for Aframax vessels to India rising to around $8 million, approximately 50% higher than early 2025 [4] Market Movers - TotalEnergies has agreed to sell 9.99% of its equity in the SK408 block offshore Malaysia to PTT while retaining a 30% stake and operatorship [5] - Shell is preparing a new drilling campaign in the PEL 39 block offshore Namibia starting April 2026, marking its return to the area after a write-down of the Graff discovery [5] Industry Developments - Neste has revised its 2035 carbon neutrality target, now pledging to cut greenhouse gas emissions by 80% by 2040 [6] - Ecopetrol has reduced its 2026 low-carbon budget by 60% to $225 million, citing a need for broader budget discipline [6] Market Sentiment - Weak Chinese macroeconomic data has influenced market sentiment, with industrial output dropping to its lowest since August 2024, leading to a decline in Brent futures below $61 and ultimately below $60 per barrel [7]

Core Viewpoint - The global oil market is expected to tighten in the medium to long term despite current short-term weaknesses due to rising output from OPEC+ and other producers, alongside reduced demand from trade tensions [1][2]. Short-Term Weakness - Brent futures are trading around $62 per barrel, down over $15 from a year ago, with a forecasted surplus of 4 million barrels per day for 2026 [2]. - Executives from Vitol, Trafigura, and Gunvor predict oil prices will weaken further before recovering, estimating a price range of $62-66.50 per barrel in one year [3]. - Gunvor's CEO noted that prices are expected to decline slightly more due to rising OPEC production and increased spare capacity from Saudi Arabia and the UAE [3]. Price Predictions - Trafigura's head of oil suggested prices could dip into the $50s during the holiday season but warned against betting on prices falling below $50 [4]. - Vitol's CEO highlighted that while the market is focused on rising supplies, low inventories in the West and strong demand for refined products have kept the market in backwardation [4]. Medium-Term Outlook - TotalEnergies' CEO expressed a bullish outlook for the medium term, citing production declines and no peak in global oil demand [6]. - ExxonMobil's CEO warned that decline rates could reach 15% per year without investment in unconventional oil and gas fields [6]. - Saudi Aramco's CEO emphasized the need for long-term investments in supply to meet resilient demand [6].

Core Insights - Oil prices showed a slight recovery in early Asian trading after two sessions of significant declines, with Brent futures at $66.17 and WTI at $62.50, reflecting a 0.21% increase on the day [1] - The recent price fluctuations are attributed to concerns over a potential OPEC+ production increase and mixed signals from U.S. crude inventory data [2][3] Group 1: Price Movements - Brent and WTI experienced a sharp selloff earlier in the week, with both benchmarks falling over three percent on Monday, marking the steepest daily losses since August 1 [2] - The decline continued on Tuesday, with both benchmarks shedding at least another one and a half percent, indicating market anxiety regarding OPEC+ production decisions [2] Group 2: Inventory Data - The American Petroleum Institute reported a decrease in U.S. crude inventories by 3.67 million barrels for the week ending September 26, suggesting tighter supply conditions [3] - However, gasoline stocks increased by 1.3 million barrels, and distillate inventories rose by 3 million barrels, presenting a mixed supply picture [3] Group 3: OPEC+ Discussions - OPEC+ is reportedly considering a production hike of up to 500,000 barrels per day in November, which is three times the increase seen in October, with Saudi Arabia advocating for a larger increase to enhance its market share [4] - OPEC has expressed unease regarding the reports of a 500,000 bpd increase, labeling them as "misleading," which underscores the uncertainty in the group's decision-making process [4] Group 4: Market Outlook - Traders are closely monitoring the upcoming EIA inventory data, which may confirm the API's reported drawdown and provide short-term support for prices [5] - The near-term direction of oil prices is expected to depend heavily on inventory trends and signals from OPEC+ ahead of its next ministerial meeting [5]

Group 1: Oil Price Movements - Oil prices increased due to Ukraine's drone attacks on Russia's energy infrastructure, leading to a reduction in fuel exports from Russia. Brent futures rose to $70.13 per barrel, up 71 cents (1.02%), while U.S. West Texas Intermediate (WTI) crude finished at $65.72 per barrel, gaining 74 cents (1.14%) [1] - Both Brent and WTI benchmarks are on track to register their largest increases since mid-June [1] Group 2: Geopolitical Factors - The situation between Russia and Ukraine remains a focal point for the markets, with drone attacks by Ukraine contributing to rising oil prices [2] - Russia is implementing a partial ban on diesel exports until the end of the year and extending an existing ban on gasoline exports, which has resulted in fuel shortages in several Russian regions [2] Group 3: U.S. Government Actions and Economic Data - U.S. government actions, including pressure from President Trump on allies to reduce Russian imports, are supportive of rising oil prices. There are expectations that countries like India and Turkey may reduce their Russian imports [3] - The U.S. gross domestic product (GDP) increased at an upwardly revised annualized rate of 3.8% in the last quarter, which may influence oil demand positively [5] - However, stronger-than-expected economic data could lead the U.S. Federal Reserve to be more cautious about further interest rate cuts, which could impact demand dynamics [5] Group 4: Supply Dynamics - Crude oil exports from Iraq's semi-autonomous Kurdistan region are set to resume, which may affect overall supply levels in the market [4] - The market is closely monitoring Kurdish production to assess its impact on supply [4]

Summary of Key Points from the Conference Call Industry or Company Involved - The document pertains to the global financial markets, specifically focusing on flows and liquidity in various asset classes, including equities, bonds, and commodities, as analyzed by J.P. Morgan. Core Insights and Arguments - **Fed Independence Concerns**: There is growing market concern regarding the independence of the Federal Reserve, particularly following recent political pressures. This has led to a noticeable shift in market positioning towards a 'Fed inflation trade' in rates, equities, and gold futures, while the foreign exchange market remains relatively stable with flat dollar positions since the Miran announcement [8][27]. - **Risk Appetite Indicator**: The risk appetite indicator, which compares positioning in risky versus safe currencies, continues to signal bullish sentiment towards risk assets such as equities and credit. This indicator has remained in oversold territory, suggesting potential buying opportunities for risk assets [28][34]. - **Money Market Funds (MMFs)**: Unless a significant recession occurs, leading to a drastic cut in Fed rates below 2%, MMFs are unlikely to experience substantial outflows. Historical data indicates that significant drawdowns in MMF assets typically occur only during severe economic downturns [41][42]. - **Market Movements**: Following the Miran and Cook announcements, various market indices showed notable changes, with the S&P 500 increasing by 1.1% and gold rising by 4.9% [11][15]. The value rotation in equities has been a key manifestation of the inflation trade, with a shift towards value stocks observed [21][27]. Other Important but Possibly Overlooked Content - **ETF Flows**: The document includes detailed statistics on mutual fund and ETF flows, indicating a significant increase in bond flows compared to equities, with bond flows averaging $18.1 billion over the last four weeks [3]. - **Short Interest Trends**: There has been a notable decrease in short interest for certain bond ETFs, suggesting a shift in market sentiment towards a more bullish outlook on longer-dated bonds [14][16]. - **Commodity Prices**: The document discusses the implications of Fed independence on commodity prices, particularly highlighting that while energy prices may be influenced indirectly, gold prices are more directly affected by concerns over Fed policy [19][20]. - **Positioning Metrics**: The analysis includes various positioning metrics across asset classes, indicating a complex interplay between inflation expectations and Fed policy, which could influence future market movements [7][27]. This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state of the financial markets as analyzed by J.P. Morgan.