In Asian trading on Thursday, oil prices declined by more than 2%, following remarks by U.S. President Donald Trump which alleviated market concerns over the potential military conflict with Iran and related supply disruptions. President Trump indicated that the killings associated with Iran’s crackdown on domestic protests were diminishing, and he expressed doubt that large-scale executions would occur. This statement contributed to a fall in crude oil prices; Brent futures dropped by USD 1.67 to USD 64.85 per barrel and U.S. West Texas Intermediate crude decreased by USD 1.54 to USD 60.48 per barrel by 0109 GMT.
The downward movement in oil prices reflected a shift in market sentiment, as fears of an upcoming U.S. military response against Iran reduced. According to Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, selling pressure intensified on expectations that the United States would refrain from taking military action. He further noted that bearish factors were reinforced by larger-than-anticipated increases in U.S. crude inventories. While geopolitical risks remain elevated and could potentially disrupt the supply-demand balance, Kikukawa suggested that WTI is likely to trade within a range of USD 55 to USD 65 in the near term.
Oil Market Weighed Down by Supply Factors
Other additional factors contributed to the softening of oil prices. The United States has begun withdrawing some personnel from military bases in the Middle East, a move that followed warnings from Iranian officials about potential retaliatory strikes against American bases if the U.S. were to take military action. On the supply side, U.S. crude and gasoline inventories rose more than analysts had forecast, with crude stocks increasing by 3.4 million barrels in the week ending January 9. Furthermore, market participants noted that Venezuela has started to reverse production cuts that were implemented under U.S. sanctions, with crude exports resuming.
On the demand side, recent data provided a mixed outlook. The Organization of the Petroleum Exporting Countries (OPEC) projected that oil demand would continue to rise at a steady pace through 2027, with supply and demand expected to near balance by 2026. In contrast, other forecasts have pointed to the possibility of a supply glut. Meanwhile, China’s crude oil imports rose by 17% year-on-year in December, with daily import volumes reaching record levels, underscoring sustained demand from one of the world’s largest oil consumers.
Generally, the decline in oil prices reflects a combination of receding geopolitical tensions, rising inventories, and indications of returning supply from sanctioned producers, even as demand indicators from key markets remain robust.
