## Geopolitical escalation and economic expectations push oil prices higher

March WTI futures showed a significant jump today of 3.10%, while RBOB gasoline contracts surged by 2.00%. Both assets ended the month at their highest levels, but behind this driving force lies much more than just typical price fluctuations.

### Why the price per barrel of oil is rising: a combination of geopolitical and macroeconomic factors

Turbulence in Iran — one of the largest OPEC suppliers, producing over 3 million barrels daily — directly impacts energy prices. Escalating protests and stern warnings from authorities and the American leader create uncertainty about potential export disruptions. Any serious destabilization could upset the global supply balance.

At the same time, positive US macro data actively support energy demand amid geopolitical tensions. The December unemployment rate fell to 4.4%, surpassing analytical expectations, and the University of Michigan's consumer sentiment index for January reached 54.0 points. These indicators signal economic resilience and the potential for increased energy consumption.

Additional momentum is provided by geometric market processes. The oil crack spread reached a three-week high, encouraging refiners to increase raw material purchases. The annual rebalancing of portfolios in key commodity indices (BCOM and S&P GSCI), according to Citigroup forecasts, will attract about $2.2 billion into contracts for balancing gasoline and distillate production over the week.

### Market forces maintaining price jumps

Contrary to bullish trends, Saudi Arabia, trying to maintain a competitive position, has lowered Arab Light prices for February shipments for the third consecutive month. This signals concerns about weakening global demand.

Morgan Stanley revised its forecasts, suggesting that global markets could face a significant surplus. The bank lowered price targets: the first quarter below $57.50 per barrel (from earlier $60), the second — below $55 (also from $60). IEA warns of a record surplus of 4 million barrels daily by 2026.

### On-the-ground data confirms the complexity of the situation

US strategic reserves and production tell their own story. Crude oil inventories in the US are nearly 4.1% below the five-year seasonal average, but gasoline stocks are 1.6% above normal. US production over the past week declined marginally by 0.1% to 13.811 million barrels per day, remaining near record highs.

Drilling activity, however, signals potential. Baker Hughes recorded an increase of three oil rigs to 412 installations — a small but noticeable recovery after a four-year low when the number of rigs fell from the five-year maximum of 627 (December 2022).

China’s imports in December exploded by 10%, reaching a record 12.2 million barrels per day, as the country actively replenishes strategic reserves — fueling global demand despite surplus forecasts.

### OPEC+ stance and global reshuffles

OPEC+ refrains from further production increases until the first quarter of 2026, despite an increase of 137 thousand barrels in December. The cartel’s output reached 29.03 million barrels per day, but the group is gradually restoring its cuts for 2024 — leaving 1.2 million barrels to be offset.

Sanctions and military actions have significantly reshaped the supply geography. Ukrainian drone attacks on at least 28 Russian oil refineries over four months and on tankers in the Baltic Sea created another deficit. New US and European sanctions on Russian oil infrastructure have intensified these restrictions. OPEC anticipates a surplus of 500 thousand barrels in the third quarter (earlier expecting a deficit of 400 thousand).

Oil inventories on stationary tankers, according to Vortexa, decreased by 3.4% over the week to 119.35 million barrels — another sign of a complex balance.

EIA raised its US production forecast for 2025 to 13.59 million barrels per day, laying the groundwork for price stabilization at more moderate levels.