Outlook
Brent crude remains under a mixed set of pressures from geopolitics and supply dynamics. Iran-related tensions and talk of a U.S. strike add upside risk to the oil complex, with Brent trading near 69.09 a barrel, a 90-day high. At the same time, higher U.S. inventories and OPEC+ signaling continued output to cover demand cap upside pressure. The net effect for the OIL currency is likely to be choppy, with upside bias if geopolitical risks intensify or sanctions tighten, and limited downside unless inventories surprise to the upside or demand weakens meaningfully. Oil-linked currencies (notably CAD, NOK, and RUB) tend to move with oil, but broader dollar swings and global demand signals can cap or amplify those moves.
Key drivers
- Geopolitical tensions in Iran, raising concerns about potential oil-disrupting events.
- Speculation about a possible U.S. military strike on Iran, contributing to oil price volatility.
- U.S. sanctions on Russia affecting oil producers and global supply chains; force majeure at Iraqi fields referenced.
- OPEC+ production adjustments: December increase of 137,000 bpd and plans to maintain output through Q1.
- U.S. crude inventory data showing builds, suggesting possible oversupply pressure.
- Easing U.S. sanctions on Venezuela to boost oil supply, potentially easing some supply constraints.
- Market volatility and oil-related currency impacts, with CAD, RUB, and NOK most sensitive to oil moves.
Range
- Brent Crude OIL/USD: 59.04–69.09
- OIL/EUR: 50.26–58.29
- OIL/GBP: 43.98–50.49
- OIL/JPY: 9139–10692
What could change it
- Escalation or de-escalation of Iran tensions and any credible U.S. action could push Brent toward the upper or lower ends of the current ranges.
- A surprise shift in OPEC+ policy (either material production cuts or larger-than-expected increases) could re-anchor oil prices.
- Inventories moving materially above or below expectations (especially a sharper drawdown) could tilt oil and related currencies.
- Changes in sanctions policy on Russia or Venezuela that materially alter supply could shift risk and price dynamics.
- A stronger or weaker U.S. dollar influencing commodity pricing, thereby amplifying or dampening moves in oil-linked currencies.
