Oil prices faced a tough week, dropping $12 from their peak but recovering slightly by 60 cents. This bounce followed a decrease in geopolitical risks after the resolution of the Iran-Israel war and the endorsement of Iran’s oil exports to China. Potential supply risks may arise from expected US sanctions on Russia, pushed by a group of US Senators led by Lindsay Graham. However, US Secretary of State Marco Rubio has downplayed this concern, suggesting that Senate leaders are not rushing to advance the bill, allowing for some flexibility in implementation. At a recent NATO summit, some European officials expressed frustration with the US government’s slow response to the war in Ukraine. A European diplomat noted that former President Trump’s efforts may seem influenced by Russian President Putin. Although Trump aims to end the conflict, there is a belief that increasing pressure on Putin is necessary. West Texas Intermediate (WTI) crude oil was last priced at $65.09. With the dramatic $12 drop in oil prices this week followed by a modest 60-cent rise, traders might need to adjust their short-term expectations. The majority of the decline was due to eased tensions in the Middle East—something investors quickly factored in. As the conflict between Israel and Iran cools, the geopolitical premium that previously affected prices has weakened. Iran’s oil sales to China, now quietly supported by policy approval, have introduced new supply into the market. This influx may explain some price softness, as unexpected oil can impact the market. When higher volumes reach one of the world’s largest consumers amidst a cooling economic environment, careful handling of risk-on trades is essential. On the legislative front, renewed US sanctions on Russian oil exports could lead to market volatility. However, Graham’s proposal has stalled, and Rubio suggests there isn’t much desire to push it forward quickly. This hesitation among Senate leaders hints at a delay rather than a reversal of sanctions, meaning no immediate disruption to oil flows in this segment. Interestingly, dissatisfaction is brewing in Brussels. During the NATO meeting, concerns surfaced about the US administration’s priorities regarding Ukraine. Diplomats expressed worries about the pace of action. A senior source hinted that the previous president’s approach may have appeared too lenient, signaling Europe’s expectation for stronger commitments from its allies. From a pricing perspective, WTI closing above $65 directs our attention to important technical levels that have held up in earlier cycles. Tested support levels might be at risk if incoming data reinforces a softer outlook—like rising inventories, unmet demand, or broader signs of deflation. We are monitoring contract roll dynamics and unusual trading behaviors, as shorter-dated options and quick trades often indicate larger market shifts. The flattening of calendar spreads suggests that traders are not betting on tight supplies. This means shorter strategies need to be reassessed, especially when sudden price spikes have a tendency to fade quickly. Overall, it’s essential to dig deeper than just headlines. Look for gaps between physical prices and futures, resolutions of transportation bottlenecks, and recovery in forward prices—these are where new signals are likely to emerge for now.

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