Outlook
Oil markets are showing resilience in the mid-60s, with the price signal reinforced by OPEC+ deciding to pause further production increases in Q1 and by sanctions on Russian exports. Recent data show Brent Crude OIL/USD hovering near a 90-day high around 66.20, with the currency pair moving in a wide but elevated range. The mix of supply restraint, geopolitical risk, and shifts in Asian refinery demand supports oil-sensitive currencies (CAD, NOK, RUB, BRL) in the near term, though upside remains capped by potential demand swings and broader macro risks.
Key drivers
- OPEC+ production decisions: In early January 2026, OPEC+ paused further production increases for Q1 to stabilise the market amid a potential supply surplus.
- Geopolitical tensions: Israeli airstrikes on Iran in mid-2025 underscored how Middle East conflict can lift oil prices and keep risk premia in oil markets.
- Sanctions on Russian oil exports: US sanctions in November 2025 disrupted supply chains and helped underpin higher oil prices in the near term.
- Shifts in Indian refining strategies: December 2025 data show Indian refiners increasing imports from Saudi Arabia and Iraq by about 600,000 barrels per day, affecting global demand dynamics.
Range
Brent Crude OIL/USD: 59.04 to 66.20 (current near 66.20; 90-day high)
OIL/EUR: 50.26 to 57.03 (current near 55.98; 7-day high)
OIL/GBP: 43.98 to 49.56 (current near 48.52; 7-day high)
OIL/JPY: 9,139 to 10,499 (current near 10,308; 7-day high)
What could change it
- Surprise shift in OPEC+ policy (resume production increases or further cuts) could push oil lower or higher and alter the currency mix.
- Escalation or de-escalation of Middle East tensions or changes to sanctions on Russia could lift or cap oil prices and shift related FX.
- A meaningful shift in Indian refining demand (a sharp drop or a further large increase) could alter global oil demand and the oil-linked FX trajectory.
- Broader risk sentiment or a stronger/weaker USD could override oil linkages and reprice oil-sensitive currencies.
