Oil Set for Weekly Advance as Supply Uncertainty Clouds Outlook

Oil prices are poised for a weekly advance, driven by persistent supply uncertainty and geopolitical tensions. As of Friday, Brent crude futures were trading above $76 per barrel, marking a 1.5% increase for the week. This upward trend can be attributed to several factors, including OPEC+ production policies, geopolitical risks, and supply chain pressures.



OPEC+ production policies have been a significant factor in shaping oil market trends. In December 2024, OPEC+ agreed to a substantial production cut of 2.2 million barrels per day (b/d) to be implemented in phases, starting in the fourth quarter of 2024 (4Q24). This decision was made to address concerns about oversupply and maintain market balance (Cristian Cochintu, 18 July 2024). However, the group's decision to gradually unwind 2.2 million b/d of voluntary production cuts beginning in the fourth quarter of 2024 has created uncertainty about future supply levels.

Geopolitical tensions, such as those between Russia and Ukraine, have also contributed to supply uncertainty. The ongoing conflict has disrupted energy production and distribution networks, causing energy uncertainty, price volatility, and a slowdown in the pace of global economic activity (Banna et al., 2023). Sanctions imposed on Russia have exacerbated this uncertainty, with energy prices soaring and economic growth slowing in affected regions (Cui et al., 2023).

Supply chain pressures, exacerbated by events like the COVID-19 pandemic, have exposed the fragility of energy markets. Disruptions in one country can affect other economies, leading to further uncertainty in the oil market (Niu et al., 2022). As global economies recover from the pandemic, new disruptions could arise from other sources, such as geopolitical risks or natural disasters.

In the near future, OPEC+ production policies will continue to play a crucial role in shaping oil market trends. The group's decisions on production cuts, increases, or voluntary restraints will depend on various factors, such as global demand growth, inventory levels, and geopolitical risks. As a result, their decisions will have a significant impact on future price movements, influencing the direction and magnitude of oil price changes.

In conclusion, oil prices are set for a weekly advance as supply uncertainty clouds the market outlook. OPEC+ production policies, geopolitical tensions, and supply chain pressures have all contributed to this upward trend. As the global economy continues to evolve, investors should closely monitor these factors to make informed decisions about their oil investments.