Happy Friday!
The following is a summary of the past two weeks. Crude oil prices are closing out a volatile stretch of trading over the past two weeks with WTI hovering in the upper mid-$60s after briefly touching the highest levels in more than nine months. The market has been whipsawed between escalating geopolitical tension and increasingly mixed economic data. At this point, there is clearly a sizable geopolitical premium built into crude — many traders estimate anywhere from $8 to $10 per barrel tied specifically to Iran risk.
Two weeks ago, prices surged as Ukraine peace talks collapsed after only two hours and Iran tensions escalated sharply. Iran also floated the possibility of blocking portions of the Strait of Hormuz, Russia and Iran conducted joint naval maneuvers, and the U.S. signaled readiness for a multi-week campaign if nuclear talks fail with a massive buildup of naval presence in the region. This week Trump has now given Iran roughly 15 days before potential military action. Negotiations in Geneva started this week. Although talks have resumed several times, there is still no agreement, and both sides remain far apart on key issues. If talks break down completely, I believe WTI could quickly push toward $70 per barrel. However, if a deal materializes, much of that premium would likely unwind.
OPEC is clearly watching the Iran situation closely. Midweek, OPEC hinted at adding roughly 150,000 barrels per day starting in April. The message is clear: Saudi Arabia and the UAE are signaling they are prepared to replace Iranian barrels if necessary. That announcement alone acts as a potential ceiling on runaway crude oil prices. But at the same time, Saudi exports have fallen sharply, potentially reflecting softer global demand amid tariff friction. Announcements of lower demand usually lower oil prices, but geopolitics continue to dominate the crude oil trade.
On the supply side, the data has been inconsistent. The EIA reported a very bullish 9-million-barrel crude draw two weeks ago along with large product draws, helping push WTI through the $65 resistance level. Yet this past week, the EIA showed a massive 16-million-barrel build in crude inventories, underscoring how difficult it is to read true demand trends right now. Meanwhile, OPEC production dipped in January due to temporary setbacks in Nigeria and Libya, and Russian drilling activity has fallen to its lowest level since 2021. Sanctions and Ukrainian attacks are clearly creating pain on Russian oil flows, although Russia continues offering steep discounts to keep barrels flowing.
India remains a pivotal buyer of crude oil. The U.S. struck a deal allowing India access to Venezuelan crude while simultaneously lifting sanctions on Russian oil for smaller Indian refiners — a move that upset both the EU and Ukraine. However, India is increasing purchases of cheap Saudi barrels due to Saudi Arabia losing out on selling to China. China continues to absorb discounted Russian supply. Even though smaller Indian refiners have said they will reduce Russian imports, I do not believe India will ever sever ties with Russia. The logistics and pricing advantages are too compelling.
Venezuela continues to climb back toward 1 million barrels per day, and additional production growth is possible in 2026 if infrastructure investment materializes. Guyana is also accelerating output, with production expected to exceed 1 million barrels per day in the near future at breakeven costs near $35 per barrel. The development further supports the structural surplus narrative for 2026.
The four-year anniversary of the Ukraine war served as a reminder of how much the energy landscape has changed. Russian oil revenues have reportedly halved in February, yet Moscow shows little willingness to compromise. Russia has even signaled potential naval escorts for oil shipments, while Ukraine claims cruise missile use has escalated the conflict. Libya is inviting Western investment, pushing Russia further out of North African refined markets causing further tension with the West. Cuba is tested new Russian oil shipments this week but so far ships have been diverted. But the U.S. is selectively allowing Venezuelan crude sales to Cuba’s private sector while maintaining pressure on government entities. Again, the move continues to put pressure on Russian oil exports.
Shipping costs through the Gulf have surged to six-month highs as charter rates nearly tripled amid Iran tensions. If shipping constraints persist, freight alone could add further upward pressure on crude. We have not experienced higher crude oil prices from shipping cost increases in probably a decade.
Macro signals are beginning to complicate the picture. Fourth-quarter revised U.S. GDP printed at just 1.4%, a significant miss versus expectations near 3%. Tariff friction appears to be weighing on growth. Durable goods and factory orders dipped, consumer debt expansion is accelerating, and Jamie Dimon from Chase Bank publicly warned of early signs reminiscent of 2008 stress in credit markets. The Supreme Court striking down tariffs this past week as illegal — followed by immediate retaliatory tariffs — triggered sharp equity volatility. If tariff refunds approach $200 billion as suggested, government debt pressures could intensify further adding volatility to the markets.
Inflation, however, cooled to 2.4% year over year from 2.7%, supporting rate-cut expectations. The value of the dollar has continued to decline over the past two weeks, which is quietly keeping oil prices a bit elevated. A weak dollar combined with geopolitical tension explains much of crude’s recent strength despite soft growth data.
From my perspective, looking at everything over the past two weeks, the Iran situation is becoming technically overbought. There has been no actual supply disruption, and global inventories remain stable to elevated. If the Iran situation stabilizes, crude prices could drop dramatically. However, until there is a deal with Iran, volatility with remain steady.
The Chicago spot market has rocketed higher over the past two weeks alongside crude. Diesel has been the standout, climbing nearly 35 cents per gallon. A significant volume of barrels from Chicago continue to move toward the Northeast to meet heating demand following repeated winter storms. The March prompt contract expired on February 25th and the shift to April created additional volatility, especially for gasoline as refiners transition from winter to summer RVP specifications. Summer gasoline is more expensive to produce, which naturally lifts pricing into driving season.
Gasoline price remains relatively stable versus NYMEX, but diesel is inflated. If Iran tensions ease and temperatures moderate, diesel could fall as much as 40 cents per gallon rather quickly. For now, however, I still expect both gasoline and diesel prices at the pump to edge higher in the near term.
Propane markets have continued their steady journey this winter. Logistics are moving more smoothly and allocations have eased. Assuming no major late-season polar vortex, the worst of winter distribution challenges appear to be behind us. That said, March and April are projected to run colder than normal. I would not be surprised to see above-average propane consumption into spring. If you track your own tank levels, it would be wise to stay attentive through April.
As always, if you have any questions, please feel free to give us a call. Have a great weekend!
Best regards,
Jon Crawford
Sources: Bloomberg, Reuters, and Wall Street Journal