This week in the crude oil market was a rollercoaster of price swings as bullish supply concerns clashed with bearish macroeconomic and geopolitical developments. The early week saw oil extend its gains on supply constraints from Russia and Iran, but prices reversed sharply midweek as rising U.S. inventories, a hawkish Federal Reserve, and renewed optimism about a resolution to the Russia-Ukraine war weighed on sentiment.
With crude prices now struggling to hold gains, traders are questioning whether bullish momentum can be sustained or if further downside is imminent.
Did Supply Disruptions Provide Enough Support for Oil?
The start of the week saw oil prices rise as supply constraints from Russia and Iran fueled bullish sentiment. Russian crude production fell below its OPEC+ quota, easing oversupply concerns and sparking a short-lived rally. Simultaneously, U.S. sanctions continued to disrupt Russian crude shipments to China and India, further reinforcing supply-side tightness.
Iran faced similar challenges, with new U.S. sanctions restricting its oil exports. These supply disruptions helped crude regain some footing, with traders initially optimistic about further upside. However, macroeconomic headwinds quickly shifted the market narrative.
How Did U.S. Crude Inventories and the Fed Impact Oil Prices?
Bearish pressure mounted midweek as oil prices dropped on reports of rising U.S. crude inventories. The American Petroleum Institute (API) estimated a massive build, raising fresh concerns about oversupply. This was confirmed by the Energy Information Administration (EIA), which reported a significant increase in crude stockpiles. While gasoline and distillate inventories saw declines, they were not enough to counteract the overall bearish sentiment.
At the same time, the Federal Reserve reinforced a hawkish stance, delaying potential rate cuts as inflation remained sticky. With borrowing costs expected to stay elevated, economic activity could slow, weighing on energy demand. The Fed’s reluctance to ease policy added another layer of uncertainty, making it difficult for oil bulls to sustain any meaningful rally.
Will Ukraine Peace Talks Add More Oil to the Market?
Adding to the bearish sentiment, news emerged that Russia and Ukraine were open to peace negotiations, potentially leading to a relaxation of Western sanctions on Russian crude. Former U.S. President Donald Trump indicated that both Vladimir Putin and Volodymyr Zelenskiy expressed interest in talks, with U.S. officials instructed to explore diplomatic solutions.
If peace talks materialize and sanctions ease, Russian crude could re-enter the global market in larger volumes, reinforcing bearish pressures. Brent and WTI both fell sharply midweek on the prospect of a supply increase, showing how sensitive the market remains to geopolitical shifts.
Will Delayed U.S. Tariffs Help Oil Prices Stabilize?
In a surprising development, U.S. President Donald Trump postponed the implementation of new trade tariffs until at least April, offering a temporary reprieve for markets concerned about global economic growth. Earlier in the week, the administration raised steel and aluminum tariffs, escalating fears of a trade war that could hurt energy demand. The delay in broader tariffs provided a slight recovery in oil prices, preventing deeper losses in the later part of the week.
However, the long-term impact remains uncertain, as China has already imposed new tariffs on U.S. crude imports in retaliation, limiting demand for American barrels in Asia. This could weigh on West Texas Intermediate (WTI) prices in the coming weeks.
Weekly Light Crude Oil Futures