Oil Prices Rise on Iran Tensions, Middle East Supply Fears
Crude oil and gasoline prices experienced a notable increase on Wednesday, with gasoline reaching a seven-week high. The upward movement reflects a confluence of factors, including revised global crude surplus estimates, geopolitical tensions surrounding Iran, and developments within the global energy market. Crude oil found support due to a decision by the International Energy Agency (IEA) to reduce its forecast for the amount of global crude surplus this year, while ongoing uncertainty related to potential military action against Iran continues to influence market sentiment.
The IEA’s revised estimate, trimming its 2026 global crude surplus forecast to 3.7 million barrels per day (bpd) from 3.815 million bpd previously, demonstrated a key element driving the price increase. This reassessment signaled a more constrained supply outlook, bolstering confidence among investors and traders. Simultaneously, the possibility of President Trump’s potential military actions against Iran remained a significant factor, introducing volatility into the market. Concerns about potential disruptions to Middle Eastern crude supplies underscored the sensitivity of the oil market to geopolitical events. The U.S. State Department’s decision to send an aircraft strike force to the Middle East, along with intelligence advising personnel to leave the Al Udeid Air base in Qatar—a facility previously targeted by Iranian airstrikes—added further weight to these anxieties.
Beyond broader geopolitical considerations, specific events further impacted the market. Ukrainian drone and missile attacks on Russian refineries over the past five months were limiting Russia’s crude export capabilities, a reduction in global oil supplies. Simultaneously, since the end of November, Ukraine has intensified its attacks on Russian tankers in the Baltic Sea. The targeting of these vessels demonstrated the extent of the disruption impacting key supply routes. The persistent pressure from sanctions imposed by the U.S. and the European Union on Russian oil companies, infrastructure, and tankers compounded these challenges. These actions were designed to curtail the flow of Russian oil to international markets, contributing to supply constraints.
Market participants were closely monitoring weekly inventory reports and production data. The consensus anticipated a decrease in U.S. crude oil inventories of 108,000 barrels and an increase in gasoline supplies of 1.466 million barrels. Data released last Wednesday showed that U.S. crude oil inventories were 3.4% below the five-year seasonal average, while gasoline inventories were 3.4% above that benchmark. Distillate inventories also fell 4.1% below the five-year average. U.S. crude oil production declined by 0.4% to 13.753 million bpd, just below a record high of 13.862 million bpd recorded the previous week. Baker Hughes reported a rise in the number of active U.S. oil rigs to 410, slightly above a 4.25-year low. Over the past 2.5 years, the number of drilling rigs had fallen sharply from a high of 627 in December 2022. OPEC+ decisions were also playing a pivotal role in the market. OPEC+ had announced a pause in production increases, and OPEC’s December crude production rose by +40,000 bpd.
The upcoming weekly U.S. Energy Information Administration (EIA) inventory report is expected to provide further insight into the state of the market. Technical analysis indicates expectations for a decline in crude oil inventories of 108,000 bbl and an increase in gasoline supplies of +1.466 million bbl. These anticipated changes in inventory levels, coupled with ongoing geopolitical uncertainties and OPEC+ policies, will undoubtedly shape market sentiment and influence price movements in the days ahead.
