Oil: Geopolitics keep prices supported – Commerzbank

Commerzbank’s Carsten Fritsch expects OPEC+ to only slightly increase Oil production from April, with Russia underproducing and Kazakhstan constrained, so a modest quota hike should not pressure prices. He highlights that US–Iran tensions and the risk of a US strike are likely to keep Oil well supported in the near term despite marginal supply increases.

OPEC+ caution and US–Iran tensions

"The eight OPEC+ countries with voluntary production restrictions will decide this weekend how to proceed with oil production in April. Statements from OPEC+ sources indicate that production quotas could be increased by 137,000 barrels per day. This is because the oil market is less oversupplied than expected at the beginning of the year, as a considerable portion of the oversupply is difficult to sell due to sanctions and is being stored in tankers at sea. In addition, there have been supply disruptions, such as recently in Kazakhstan."

"The OPEC+ decision is complicated by the US-Iran conflict, as it is currently difficult to predict whether there will be supply disruptions and how severe they will be. This also argues in favour of a gradual expansion of production. However, this is unlikely to be fully implemented, as Russia is already producing significantly less than agreed."

"The announcement of a slight increase in production by OPEC+ is therefore unlikely to weigh on oil prices."

"More important for oil prices at present are the news on the conflict between the US and Iran. Although yesterday's talks did not result in a breakthrough, they were viewed positively by the mediator Oman and Iran. Another round of talks is scheduled for next week."

"The continuing risk of a US military strike is therefore likely to remain the dominant issue on the oil market, which suggests that oil prices will remain well supported."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)