The May’25 Brent crude futures opened on 24 March above $72/bbl, marking its highest level traded since the start of March. Prices were supported last week as the US sanctioned a Chinese teapot refiner for the first time as it stepped up pressure on buyers of Iranian oil, while OPEC+ issued a new plan for its members to compensate for overproduction. Looking forward to this week, we anticipate prices to see further support, finishing the week between $72 and $75/bbl. The following factors are expected to be key drivers of price action this week:
- US Tariffs
- US Macroeconomic Data
- Market Positioning
The White House’s move to narrow its approach to tariffs has introduced a measure of relief, though uncertainty continues to weigh on crude prices amid concerns of a potential slowdown in oil demand. This comes as U.S. sanctions on Iran continue to restrict supply, keeping geopolitical risks in focus. Markets are bracing for the US to intensify its trade war next month, with Trump declaring 2 April as “Liberation Day” for the U.S., promising the announcement of “reciprocal tariffs.’ However, reports from Bloomberg and the Wall Street Journal over the weekend suggest that industry-specific tariffs may be excluded from the plan. Last week, Trump signalled that “there’ll be flexibility” in the rollout of tariffs but maintained that the policy would be “basically reciprocal,” downplaying the idea of broad exceptions. Although this news has lifted US and European equity futures, they may also signal a delay rather than a de-escalation of tariff threats. Still, any perceived softening in tone or implementation of tariffs could have bullish knock-on effect on oil prices.
Key U.S. macroeconomic data due this week could shift market sentiment and outlook for the US economy, and hence the picture for US oil consumption. Earlier this month, the CPI reading for February eased to 2.8%, lower than expected. The data came at a pivotal moment, providing temporary relief to markets and preventing a deeper sell-off in risk assets. This week, attention turns to the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation measure, U.S. home sales, and the University of Michigan’s consumer sentiment survey. A weaker-than-expected inflation reading could exert downward pressure on the U.S. dollar and prove bullish for oil, as dollar-denominated crude becomes cheaper for foreign buyers, increasing demand. Similarly, stronger-than-expected home sales and consumer sentiment would indicate economic resilience – which could support oil prices.
Market positioning indicates that speculators are regaining confidence in Brent, with bullish bets on the rise. The latest ICE COT report for the week ending 18 March showed money managers increasing long positions while trimming shorts, marking a reversal after four consecutive weekly declines in net positioning. Despite the uptick, net positions remain below the highs seen in late January and early February, indicating there may still be room for additional bullish momentum to build. Similarly, Onyx’s timelier CTA model shows that net positioning has bottomed out, rising from -38k lots on 17 March to -24k lots by 24 March. While overall sentiment among CTAs remains bearish, with net positions still below zero, the shift signals early signs of a turnaround with plenty of room for positions to rise further – potentially fuelling additional upside in prices.
