Oil prices steady as geopolitical fears ease and surplus expectations hold

Key takeaways:

• The recent escalation drove a short lived price uptick as traders priced higher risk linked to US Iran tensions, but the move was led by headlines more than fundamentals.

• That fear premium has eased, yet it has not fully disappeared because diplomacy can shift quickly and markets still price some residual risk.

• Seasonality is soft for oil demand at this time of year, with North America a partial exception due to heating needs, while weather can disrupt supply, but these are temporary forces rather than structural constraints, supporting a 60 to 70 dollars per barrel trading range.

• OPEC plus is sticking to a wait and see approach because there is no clear change in underlying market fundamentals, and producers want flexibility if geopolitical risks begin to affect supply.

• Over the longer term, OPEC plus may face a tougher test with Venezuela, since its proximity to the US can create incentives to act independently, including the risk of overproduction, similar to recurring quota discipline challenges seen elsewhere.

• Even with sanction easing, Venezuela cannot quickly replace lost Iranian or Russian barrels, since ramping output takes time, investment, and deeper structural reforms that go beyond changes in political leadership.

• The market still expects a meaningful surplus this year despite some upward demand revisions, and ample spare capacity remains a buffer, which is consistent with current prices signalling comfortable availability.

• China, a key driver of global oil demand growth, is still not showing a strong pickup, reflecting a weaker than expected economy and reinforcing the cautious demand outlook.