Oil Steadies After Ukraine War Developments, Oversupply Concerns
Oil prices have stabilized after a series of declines, as the prospect of increased supply from Iraq and Russia weighs on the outlook. Market indicators point to a potential oversupply, signaling market weakness.
Brent crude is trading below $75 per barrel, while West Texas Intermediate (WTI) hovers above $70. The front-month WTI contract briefly traded at a premium of 1 cent over the next-month contract, marking the first time since November that the prompt spread has turned negative, known as contango.
This shift from a bullish backwardation structure follows forecasts from major oil agencies predicting a mild oversupply this year. Concerns over supply were amplified over the weekend after Iraq's Kurdistan region indicated the potential resumption of oil exports in March. Additionally, President Trump's push for an end to the war in Ukraine raises the prospect of increased Russian oil flows.
"Oil market sentiment remains sour, with weakness in the spot price and timespreads pointing towards a softer physical market," said Warren Patterson, ING Groep's head of commodities strategy.
Crude oil prices have fluctuated in recent weeks due to President Trump's unpredictable tariffs and threats of sanctions against producers like Iran. Prices surged on Friday after US Treasury Secretary Scott Bessent announced the administration's aim to limit Tehran's oil exports to less than 10% of current levels. However, prices subsequently dropped due to skepticism over the feasibility of the plan.