After Apr’25 Brent crude futures hit resistance around the $77/bbl level on 20 February, prices have declined to $72.50/bbl as of 1800 GMT on 26 February. This was the lowest the M1 Brent futures contract has been since the end of December 2024. As of 28 February, Apr’25 Brent futures has rebounded to $73.05/bbl at 1200 GMT. The key factors influencing crude prices this week were:
- Weak US economic data and stronger dollar
- Progress towards US-mediated Ukraine peace talks
- Ample supply with limited disruption to oil flows
This week, a series of poor data signalled a slowdown in the US economy. On Tuesday, the consumer confidence index dropped to 98.3 compared to a forecast of 102.5, now at an eight-month low. On Wednesday, Treasury Secretary Scott Bessent claimed that the US private sector has “been in a recession”, accompanied by a -10.5% m/m decline in new home sales on this day (+8.1% prior). Then, initial jobless claims came in at 242k, significantly higher than the expected 222k and at a two-month high. As a result, the picture for domestic US oil consumption was distinctly more bearish this week. Furthermore, the DXY climbed to a fortnightly high of 107 by 27 Feb, as investors sought safety in the US dollar amid market uncertainty surrounding President Trump’s tariffs. A stronger dollar often leads to weaker demand from major oil-importing countries, with dollar-denominated crude becoming more expensive for foreign buyers and reducing demand in turn.
Ongoing progress toward a resolution in the Russia-Ukraine conflict continued to pressure crude oil markets throughout the week. On Tuesday (25 Feb), the US and Ukraine agreed on the terms of a draft minerals deal in exchange for security against Russia, with the Ukrainian Deputy Prime Minister claiming the deal would lay the groundwork for long-term cooperation between Kyiv and Washington. Meanwhile, Russian and US diplomats met on Thursday in Istanbul to restore normal functioning of their respective embassies, with Putin saying initial contacts with Trump’s new administration inspired hope. However, several obstacles remain before a ceasefire can be reached, with the Russian Foreign Minister Lavrov stating that fighting will only stop once there is “a solid and durable result that suits Russia”. On Wednesday, we saw a Russian drone attack damage a Ukrainian energy facility in the southeastern Dnipropetrovsk region, with Ukraine exchanging fire on Russia’s Tuapse oil refinery on the Black Sea coast. If these attacks against energy infrastructure continue, we could potentially see bullish sentiment pick up in Brent.
Nevertheless, the overall outlook in Europe remains bearish, with any disruption to Ukrainian and Russian crude being partially offset by the resumption of oil flows from Iraqi Kurdistan. Kurdish oil exports could restart as soon as today (February 28) – while the Trump administration is increasing pressure on Iraq to allow the restart or risk facing sanctions alongside Iran, according to eight sources cited by Reuters. In US fundamentals, EIA stats showed a small 2.3mb draw in US crude inventories for the week to 21 Feb. However, this followed four consecutive weeks of relatively large stock builds. As a result, ample domestic supply in the US has bolstered bearish sentiment in crude oil his week.
