Oil "reacted" to the situation in the Middle East
Brent crude oil reached a 7-month high of 73 dollars per barrel at the trading in London the previous day. Since the beginning of the year, the price has increased by 19% on the background of disruptions in production, sanctions, continued accumulation of reserves by China and concerns about the escalation of tensions in the Middle East.
In Q4 2025, alliance members increased production by an average of 137,000 bpd. Then, amid risks of oversupply in the global market, it was decided to suspend production increase for Q1 2026.
The probability of oil surplus is reduced
President Donald Trump said the US launched a major military operation against Iran and Israel launched “preventive” airstrikes against targets in the country. In response, US military bases in the United Arab Emirates, Bahrain, Qatar and Kuwait were hit.
Iran’s semi-official Mehr news agency also reported an explosion on Kharg Island, where a key Iranian oil export terminal is located, ProFinanse reported. No details on the condition of the terminal were given. Oil facilities were not targeted in the June 2025 attack on Iran’s nuclear facilities.
While global supply exceeds demand, a series of supply disruptions from North America to Kazakhstan and Russia have mitigated the size of the surplus. Most of the excess supply relates to oil under sanctions (Russia or Iran) or oil that China is buying up for strategic reserves.
