Last week, oil prices recorded their strongest weekly gain since the beginning of January. The Brent oil price thus almost made up for the losses since the beginning of March. The current escalation in the Middle East provided a tailwind, as this justifies a certain risk premium on the oil price, Commerzbank's commodity analyst Carsten Fritsch reports.
Prospect of higher OPEC+ oil supply to limit the upside potential for oil prices
"The ceasefire between Israel and Hamas in the Gaza Strip seems to be on the verge of collapse and the ceasefire between Israel and Hezbollah in Lebanon is also at risk of being put to the test following reciprocal rocket attacks. The recent US attacks on Houthi rebel positions in Yemen could also draw Iran back into the Middle East conflict, as it is supporting the Houthis as a proxy in the fight against Israel. The US government also tightened oil sanctions against Iran last week, including an independent Chinese refinery on the sanctions list for the first time. This could also deter other potential buyers of Iranian oil."
"US President Trump also indicated yesterday that countries that buy oil and gas from Venezuela will be subject to a 25% tariff on all trade with the US from 2 April. Oil prices rose further as a result. This is the most serious sanction threat Trump has made on the oil market to date. Venezuela recently produced a good 900 thousand to just under 1 million barrels per day, depending on the data source, meaning that Venezuela's oil production has doubled since the end of 2020. The last time it was higher was six years ago."
"However, the prospect of higher oil supply from OPEC+ is likely to limit the upside potential for oil prices. In addition, Reuters reported yesterday, citing four informed sources, that OPEC+ also intends to stick to the expansion of oil production planned for May. The production cuts in some countries to compensate for previous excess production are also said to provide scope for this."
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