| 01/12 Open | 01/23 Close | Price Change | |
|---|---|---|---|
| Brent Crude | 63.34 | 65.88 | +4.01% |
| WTI Crude | 59.00 | 61.07 | +3.51% |
| Dubai Crude | 61.17 | 61.67 | +0.82% |
In the early part of the first week, concerns over escalating tensions in Iran pushed oil prices higher. During the mid-period, the United States encouraged continued protests, canceled meetings with Iranian officials, and conducted military deployments, signaling the possibility of military action. These developments heightened risks to Iranian crude supply and supported further price gains. At the same time, export disruptions in Kazakhstan and Libya—caused by damage to ports and facilities—further lifted prices. Toward the end of the week, however, U.S. statements indicating a temporary pause in escalation and a wait-and-see approach toward Iran reduced market concerns over Middle East conflict, leading to a rapid unwinding of the geopolitical risk premium and a sharp decline in oil prices.
In the second week, oil prices initially stabilized as tensions surrounding Iran eased. However, Kazakhstan’s suspension of production at two oilfields and former President Trump’s remarks regarding Greenland triggered market volatility and pushed prices higher. In the mid-period, rising crude inventories and progress toward completing maintenance at Kazakhstan’s oil loading facilities eased transportation constraints, weighing on prices. Later in the week, renewed U.S. military deployments and statements indicating that military force against Iran remained an option—along with winter storms in the United States that threatened supply disruptions—provided renewed support to oil prices.
Monthly Agency Reports: EIA and IEA Revise Supply and Demand Growth Higher; OPEC Maintains Existing Outlook
Supply and Demand Forecasts from the Three Major Agencies
| Unit: million b/d | Supply | Demand | |||||
|---|---|---|---|---|---|---|---|
| Agency | EIA | OPEC (non-DoC liquids + DoC NGLs) | IEA | EIA | OPEC (OECD) | OPEC (non-OECD) | IEA |
| 2025 | 106.28 (+0.10) | 62.78 (-0.02) | 106.20 | 103.69 (-0.25) | 45.94 (-0.02) | 59.20 (+0.03) | 103.73 |
| 2026 | 107.65 (+0.22) | 63.55 (+0.05) | 108.70 (+0.10) | 104.82 (-0.35) | 46.09 (-0.02) | 60.43 (+0.02) | 104.98 (+0.39) |
| 2027 | 108.18 | 64.26 | N/A | 106.09 | 46.19 | 61.67 | N/A |
EIA
In this Short-Term Energy Outlook, the EIA included forecasts for 2027 for the first time and slightly revised upward global crude supply growth for 2026, mainly reflecting production growth from both OPEC+ and non-OPEC+ countries, particularly in South America. As nearly all global production growth in 2027 is expected to come from non-OPEC+ countries, and U.S. crude output is projected to decline further, supply growth is expected to decelerate next year. On the demand side, continued increases in China’s strategic petroleum reserves prompted a modest upward revision to global oil demand growth, which is expected to rise from 1.1 mb/d to 1.3 mb/d. Nevertheless, with limited structural adjustments in supply and demand, the near-term oil price outlook remains without a clear directional shift.
OPEC
This month’s OPEC Monthly Oil Market Report also incorporated forecasts for 2027, reflecting normalized global trade conditions, ongoing fiscal stimulus in major economies, and continued adjustments to accommodative monetary policies. Global economic growth for 2026 is projected at 3.1%, unchanged from last month, with growth expected to rise slightly to 3.2% in 2027. OPEC maintained its supply and demand growth forecasts for 2026, with supply growth driven primarily by Brazil, Canada, the United States, and Argentina, while 2027 growth is expected to be led by Brazil, Canada, Qatar, and Argentina. OPEC highlighted that in the Northern Hemisphere, rising refined product inventories and seasonal demand pressures have weighed on markets. Reduced product flows from Europe to West Africa have compressed refining margins. In Southeast Asia, increased domestic product supply, weaker export incentives, and ample Middle Eastern product availability have further pressured refining profitability, resulting in a global decline in refining margins.
IEA
In its January report, the IEA revised up its 2026 global oil demand growth forecast to 0.93 mb/d, above the 0.85 mb/d expected for 2025, reflecting diminishing impacts from U.S. tariff policies and a normalization of economic conditions. The increase is primarily driven by non-OECD demand growth. On the supply side, the IEA slightly raised its supply growth outlook, as production declines in Kazakhstan and some Middle Eastern OPEC producers were more than offset by a strong rebound in Russian output and growth from non-OPEC+ producers, including the United States, Canada, Brazil, Guyana, and Argentina. Non-OPEC+ producers are expected to contribute 1.3 mb/d of supply growth in 2026. The IEA noted that unless there are major and sustained production disruptions, OPEC+ maintains its current output policy, and U.S. shale activity declines significantly, global oil supply could still increase by approximately 2.5 mb/d in 2026.
Oil Market Data Update
Crude and Product Inventories Resume Joint Builds; Refinery Utilization Declines with Maintenance
| 01/16/26 | 01/09/26 | 01/02/26 | |
|---|---|---|---|
| Inventories (million barrels) | |||
| Commercial Crude (ex-SPR) | 426.0 (+3.6) | 422.4 (+3.3) | 419.1 |
| Strategic Petroleum Reserve | 414.5 (+0.3) | 413.7 (+0.2) | 413.5 |
| Motor Gasoline | 257.0 (+6.0) | 251.0 (+9.0) | 242.0 |
| Distillate Fuel | 132.6 (+3.4) | 129.2 (-0.1) | 129.3 |
| Production Activity | |||
| Rig Count | 411 (+1) | 410 (+1) | 409 |
| Refinery Utilization (%) | 93.3% (-2.0%) | 95.3% (+0.6%) | 94.7% |
Over the past two weeks, U.S. commercial crude inventories increased by approximately 6.9 million barrels, ending the prior drawdown trend. This was driven by sustained high domestic production, increased net imports, and the onset of seasonal first-quarter refinery maintenance, which temporarily weakened crude demand. The SPR continued its steady replenishment, increasing by roughly 0.5 million barrels, with the pace remaining stable.
Refined product inventory builds were most pronounced in motor gasoline, with gasoline and distillate stocks rising by approximately 15.0 million barrels and 3.3 million barrels, respectively. Despite being near the tail end of the winter travel season in some regions, consumption remained weak, and improved fuel efficiency continued to suppress gasoline demand. High refinery output in earlier periods also contributed to persistent gasoline inventory pressure. These trends further suggest limited recovery in industrial and transportation demand, while mild weather failed to generate significant heating oil demand, making it difficult for distillate inventories to draw down. On the supply side, although refineries entered seasonal maintenance, utilization remained above 93%, and earlier high output continued to weigh on product balances. The Baker Hughes rig count increased by two rigs to 411, indicating that upstream capital spending has not yet adjusted in response to recent oil price volatility.
Key News Commentary
Persistent Risks to Kazakhstan’s Oil Supply; Output Recovery Is Critical
Earlier, drone attacks disrupted the CPC Caspian Pipeline Consortium terminal in Russia, which handles roughly 80% of Kazakhstan’s oil exports. Severe weather and drone damage impaired mooring facilities and delayed post-maintenance recovery, forcing operational suspensions. Currently, only one mooring facility is intermittently operating, whereas Kazakhstan typically requires two to maintain full production. With storage tanks full, oil flows have been halted, severely curtailing exports. CPC Blend loadings were revised down by 45% from initial estimates, and January loadings were approximately 0.9 mb/d below the September peak.
Last week, Kazakhstan temporarily shut down production at the Tengiz and Korolev fields due to generator fires. While market attention had largely focused on Venezuela and Iran, the CPC disruption has had a more immediate and material impact on supply, given that roughly 90% of the affected crude originates from Kazakhstan. In the short term, these disruptions alleviated oversupply concerns and supported prices. However, reports indicate that some offshore mooring facilities have resumed operations, allowing exports to restart. Compared with Venezuela and Iran, Kazakhstan’s capacity and export recovery warrants closer monitoring, as realized supply disruptions have a more direct and urgent impact than prospective geopolitical risks.
Iran Remains a Key Uncertainty; Trump’s Actions Will Shape Near-Term Prices
Escalating protests in Iran previously prompted former U.S. President Trump to threaten a 25% tariff on countries engaging in commerce with Iran and to cancel meetings with Iranian officials. Subsequent U.S. military deployments raised the prospect of military action, pushing oil prices higher. Trump later stated that Iran had pledged to halt executions of protesters and that repression was easing. Following U.S. signals of a wait-and-see approach, market concerns over escalating Middle East conflict eased, and the geopolitical risk premium dissipated rapidly, leading to a sharp price pullback. However, last week, U.S. aircraft carriers and strike groups were again deployed toward the Middle East. Given prior U.S. actions against Iran and recent measures toward Venezuela, Trump’s rhetoric has increased pressure on Iran, with potential actions ranging from cyberattacks to coordinated operations with Israel targeting Iran’s energy infrastructure, consumer supply chains, and military facilities. These deployments have reignited geopolitical risk that had previously subsided.
Iran’s impact on oil markets has been characterized by rapid accumulation and equally rapid dissipation of risk premiums. Markets initially priced in potential export disruptions, lifting prices, but conciliatory signals subsequently reduced escalation probabilities and erased those premiums. Recent U.S. deployments, however, underscore a sustained high military presence, making it difficult for markets to fully dismiss the risk of policy inconsistency.
Overall, rising U.S. crude inventories, recovering Mediterranean and Black Sea supplies, and the return of Venezuelan crude to global markets have added incremental supply, reinforcing the view that balances remain loose. These factors have capped upside potential and led producers and refiners to treat geopolitical volatility as tactical rather than structural. Only a material escalation threatening major shipping routes or regional production is likely to force a rapid reassessment of global supply–demand balances.
Impact of U.S. Winter Storms on Natural Gas and Oil Markets
Severe cold has frozen oil and gas wells across much of the United States, including pipelines, potentially disrupting nearly 10% of U.S. natural gas supply while sharply increasing heating and power-generation demand. Many gas traders had positioned for lower prices amid ample supply, but cold weather and tight inventories in Europe, combined with heightened geopolitical risks, drove gas prices higher and forced short covering, accelerating the rally.
Blizzards also threaten oil production in North Dakota and Texas, reducing output by approximately 7%. Even as temperatures recover, restart efforts may be delayed. While global oil supply remains sufficient to absorb temporary weather-related disruptions and reduced refinery throughput, prolonged pipeline constraints could disrupt regional markets and strand crude. Refinery utilization has fallen by roughly 2%, raising concerns over the impact of extreme cold on oil supply and refining operations.
The U.S. Department of Energy has issued emergency orders allowing PJM Interconnection to operate power plants at maximum capacity—including coal- and oil-fired units—without regard to certain environmental or state regulations. Mechanically, this shifts part of electricity demand from natural gas to liquid fuels. With gas wells and pipelines frozen, fuel oil and diesel (and in some regions low-sulfur fuel oil) serve as backup energy sources, potentially boosting refined product demand and accelerating near-term distillate drawdowns. However, once temperatures normalize and gas supply recovers, fuel oil demand is likely to retreat quickly. Concurrently, refinery disruptions may limit product supply, amplifying short-term inventory draws. These draws, however, are unlikely to reflect structural demand improvement and should fade as weather effects subside, with inventory trends reverting to fundamentals such as refinery recovery, end-user demand, and logistics normalization.
Conclusion
Summary of the Three Major Agencies’ Monthly Reports
Overall, the tone of the latest monthly reports from the three major agencies is neutral, with both the EIA and OPEC incorporating forecasts for 2027 for the first time. OPEC maintained its 2026 global oil supply and demand growth forecasts, while the EIA and IEA modestly revised both demand and supply growth higher, reflecting reduced tariff impacts, fiscal measures in major economies, and ongoing monetary policy adjustments. The EIA emphasized that continued additions to China’s strategic reserves could provide important support for future oil prices. On the supply side, all three agencies agree that non-OPEC+ producers—particularly Brazil, Canada, the United States, and Argentina—will drive most production growth over the next two years. OPEC highlighted that rising product inventories, seasonal demand pressures, reduced product flows, increased domestic supply, weaker export incentives, and ample Middle Eastern product availability have compressed refining margins globally. Fundamentally, absent major and sustained supply disruptions, a shift in OPEC+ policy, or a sharp downturn in U.S. shale activity, global oil supply is expected to continue exceeding demand.
Short-Term Oil Market Outlook
Over the past two weeks, oil prices have been driven higher by geopolitical events, supply disruptions in Kazakhstan, and U.S. winter storms. Despite some production losses, output remains elevated, imports have increased, and seasonal refinery maintenance has weakened crude demand, leading to renewed inventory builds and ending the prior drawdown trend. Refined product inventory pressure has intensified, underscoring the lack of a meaningful pickup in end-user demand and the lingering effects of earlier high refinery output. Going forward, attention will focus on whether winter storm–related increases in heating and power fuel demand can meaningfully alleviate refined product inventory builds.
