Outlook
Oil prices and oil-linked currencies remain underpinned by supply discipline and risk premia. OPEC+ on January 4, 2026 agreed to pause further production increases for Q1 to stabilize the market, supporting Brent. Sanctions on Russian oil, a shift in Indian refining demand, and ongoing geopolitical tensions provide an additional backdrop for oil strength, while broader demand trends and U.S. dollar moves will cap or cap upside. Near-term bias leans to a rangebound path with occasional tests higher if supply concerns persist, but gains may be limited if demand softens or the dollar strengthens.
Key drivers
- OPEC+ decision to pause further production increases for the first quarter, aiming to stabilize the market.
- Geopolitical tensions in the Middle East, including past events such as Israeli airstrikes on Iran, which can renew risk premia in Brent.
- Sanctions on Russian oil exports disrupting supply chains and providing price support.
- Indian refining strategies: higher imports from Saudi Arabia and Iraq (December 2025) affecting global oil demand dynamics.
- Overall macro factors: currency moves, global growth, and risk sentiment influencing oil demand and pricing.
Range
OIL to USD: 64.31 (3-month average 63; range 59.04–66.18)
OIL to EUR: 54.86 (3-month average 54.11; range 50.26–57.03)
OIL to GBP: 47.86 (3-month average 47.34; range 43.98–49.56)
OIL to JPY: 10174 (3-month average 9814; range 9139–10499)
What could change it
- A shift in OPEC+ policy (production increases resume or deeper cuts).
- Escalation or de-escalation of Middle East tensions impacting risk premia.
- Reintroduction or tightening of sanctions on Russian oil affecting supply.
- Unexpected changes in Indian refinery demand altering global oil dynamics.
- A stronger or weaker U.S. dollar influencing commodity currencies and oil prices.
