Tariffs, Gas Shifts, and Geopolitics: What’s Driving Oil Now

Key highlights:

– Tariffs weigh on oil demand: The initial shock of this year’s tariff announcements has softened due to delays and partial deals. Still, the global economic outlook remains weak, keeping pressure on oil demand forecasts.

– Natural gas markets more dynamic than oil: While Asia continues to drive growth, Europe is undergoing a structural shift. The pivot from pipeline to LNG imports and the switch in supplier dominance from Russia to the U.S. is transforming Europe into a critical market to watch.

– Ukraine peace talks as the main driver of oil prices: Recent oil price movements have been driven less by fundamentals and more by geopolitics. Markets react sharply to headlines on negotiations, brokered largely by U.S. President Donald Trump, though momentum quickly fades as uncertainty persists.

– Ceasefire and sanctions impact: A ceasefire would not suddenly release new Russian supply—barrels never left the market, though sold at steeper discounts. But a breakdown in talks followed by tougher secondary U.S. sanctions could disrupt markets significantly.

– Diverging demand forecasts: Analysts remain cautious about oversupply. OPEC+ maintains a far more optimistic view than the IEA, projecting nearly double the demand growth. This leaves the IEA describing the market as “comfortably supplied.”

– Current oil price levels: Prices remain in a narrow band. Seasonal demand and falling U.S. stockpiles have caused short-term gains, but spikes fade quickly. Considering OPEC+ has fully unwound its 2.2 mb/d of voluntary cuts, oil prices have held up relatively well, highlighting market resilience.