Crude Pulls Back as Geopolitical Risk Premium Fades

Crude oil prices were trading slightly higher this morning, with Brent near $66 per barrel and West Texas Intermediate (WTI) around $62. Even with the small rebound, prices remain below last week's levels after dropping more than $3 per barrel on Monday, February 2.

The selloff followed remarks from U.S. President Donald Trump indicating that Iran was "seriously talking" with Washington, alongside confirmation that nuclear discussions are expected to resume in Turkey on Friday, February 6. Iranian officials signaled openness to negotiations within the nuclear framework. With the likelihood of near-term escalation appearing to diminish, the geopolitical risk premium built into crude throughout January began to fade.

Beyond geopolitics, several supply factors have contributed to the recent price direction. Venezuela's crude exports rebounded in January to approximately 800,000 barrels per day, up from about 498,000 barrels per day in December. The United States received roughly 284,000 barrels per day of those exports. Output from Kazakhstan's Tengiz field recovered over the weekend and is expected to continue rising this week.

Meanwhile, OPEC+ agreed on Sunday, February 1, to keep production unchanged for March, maintaining the final month of a three-month supply freeze. Russian Deputy Prime Minister Alexander Novak stated that the global oil market is currently balanced and that demand is expected to increase gradually in March and April. Russia also reported sufficient domestic fuel volumes.

Currency strength has also weighed on prices. The U.S. dollar index has hovered near its highest level in more than a week, making dollar-denominated crude more expensive for foreign buyers and adding pressure to oil markets.

Financial positioning has amplified recent volatility. Managed money participants increased crude oil net length by 23,700 lots through last Tuesday, with both WTI and Brent seeing increases in long positions and reductions in short positions. NYMEX heating oil net length also increased, reflecting active participation in the distillates market.

Rig activity remained steady in the latest data for the week ended January 30, with the U.S. crude oil rig count flat at 411 and Canadian crude rigs unchanged at 156. The stable drilling pace indicates no immediate shift in North American production.

Crude oil prices are trading slightly higher this morning, with Brent near $66 per barrel and West Texas Intermediate (WTI) around $62. Even with the small rebound, prices remain below last week's levels after dropping more than $3 per barrel on Monday, February 2.

The selloff followed remarks from U.S. President Donald Trump indicating that Iran was "seriously talking" with Washington, alongside confirmation that nuclear discussions are expected to resume in Turkey on Friday, February 6. Iranian officials signaled openness to negotiations within the nuclear framework. With the likelihood of near-term escalation appearing to diminish, the geopolitical risk premium built into crude throughout January began to fade.

Beyond geopolitics, several supply factors have contributed to the recent price direction. Venezuela's crude exports rebounded in January to approximately 800,000 barrels per day, up from about 498,000 barrels per day in December. The United States received roughly 284,000 barrels per day of those exports. Output from Kazakhstan's Tengiz field recovered over the weekend and is expected to continue rising this week.

Meanwhile, OPEC+ agreed on Sunday, February 1, to keep production unchanged for March, maintaining the final month of a three-month supply freeze. Russian Deputy Prime Minister Alexander Novak stated that the global oil market is currently balanced and that demand is expected to increase gradually in March and April. Russia also reported sufficient domestic fuel volumes.

Currency strength has also weighed on prices. The U.S. dollar index has hovered near its highest level in more than a week, making dollar-denominated crude more expensive for foreign buyers and adding pressure to oil markets.

Financial positioning has amplified recent volatility. Managed money participants increased crude oil net length by 23,700 lots through last Tuesday, with both WTI and Brent seeing increases in long positions and reductions in short positions. NYMEX heating oil net length also increased, reflecting active participation in the distillates market.

Rig activity remained steady in the latest data for the week ended January 30, with the U.S. crude oil rig count flat at 411 and Canadian crude rigs unchanged at 156. The stable drilling pace indicates no immediate shift in North American production.