Brent crude futures are on track for another weekly loss. At the start of the week, we forecast the front-month Brent to be trading between $70-73.00/bbl, and Brent is supported above $70.50/bbl at the time of writing. Supply developments and aggressive US economic and foreign policy somewhat undermined the price drivers we identified earlier this week. Price weakness came as OPEC+ wrong-footed market expectations by deciding to begin unwinding voluntary cuts. At the same time, Trump’s tariff tango kept the market guessing on which foot to dance. The market did catch its breath until Friday, recovering on news that the US was prepared to reduce Iranian oil exports to a trickle and impose more sanctions on Russia.
The key factors driving crude prices this week include:
OPEC+ decide to unwind voluntary cuts
Tariff confusion
Iran and Russia sanction threats
The surprise announcement of the return of 138kb/d of OPEC+ oil output in April helped pressure prices on Monday and Tuesday when Brent traded below $68/bbl. The impact of this output increase on oil balances is relatively small, but the optics were price negative given a serious lack of compliance by some member countries like the UAE and Iraq. Given the market’s reaction, Deputy Prime Minister of Russia Alexander Novak said OPEC+ may reverse the output hike after April with the usual proviso of market conditions dictating any decision. Uncertainty in the oil market outlook was echoed by Saudi Aramco as they the OSP of Arab Light to Asia by 40c/bbl in April, exceeding the 15c/bbl reduction expected by traders in a Bloomberg survey. This marks the first price reduction in three months, following a sharp increase in March.
The state of flux of tariffs from and on America has left the market in a tricky situation. On Tuesday, President Trump confirmed plans to impose 10% tariffs on Canadian and Mexican oil and gas, with retaliatory tariffs coming from both countries following this. The delays and debate around these tariffs were over, and there was some clarity for a few days. This boost in confidence was undermined by the exemption of automobiles coming through the USMCA on Wednesday and the pausing of tariffs on Mexico and Canada for USMCA goods. This includes hydrocarbons.
However, price support developed by the end of the week with threats by US Treasury Secretary Scott Bessent to dismantle Iran’s oil sector and drone production capabilities. Mr. Bessent emphasised that the current US administration’s maximum pressure policy is specifically aimed at crippling Iran’s economy. The US is also willing to impose strong sanctions on Russian energy to help achieve a ceasefire in the Ukraine war.
