As with XAUUSD, April started with optimism for the oil market, as Brent crude oil rose above $75 per barrel for the first time since February 21. The driver remains the same as in recent weeks: rising geopolitical risks.
Traders are increasingly hedging against the possibility that Trump will make good on his threats to attack Iran and impose sanctions if Tehran fails to reach an agreement on its nuclear program. Tensions rose further after Iran's Supreme Leader vowed a forceful response to any provocation.
Adding to the uncertainty, the U.S. president recently threatened to impose new tariffs, specifically a 25% duty on all goods imported into the U.S. by buyers of Russian oil, unless Moscow agrees to end the conflict in Ukraine. Such a move could pressure major importers such as China and India.
Will we soon see $80 per barrel?
According to the latest report from the International Energy Agency, strong production growth in the Americas, the end of OPEC+ supply cuts, and weaker-than-expected demand due to economic difficulties could result in an oil surplus of 600,000 barrels per day in 2025.
Meanwhile, as of April 3, eight OPEC+ member countries have begun to gradually increase oil production after a prolonged period of voluntary cuts. The staggered return of 2.2 million barrels per day will run from April 2025 to September 2026.
As for the increased interest among options traders in mid-March in June contracts with a strike price of $100 per barrel, it does not necessarily mean that they expect oil to reach that level. Rather, they are hedging against that scenario, considering it a realistic possibility.
Currently, there are no compelling fundamental reasons for a sharp rise in oil prices. However, nothing can be ruled out. Precisely for this reason, traders are taking precautions.
What now?
In the short term, volatility will likely continue, driven by Trump's public comments and incoming macroeconomic data. In that regard, China's latest business activity data provided some support for oil prices: the PMI manufacturing (50.5) and services (50.8) indices beat consensus forecasts in March.
The market's attention now turns to U.S. data, including the JOLTS job openings report. Last, let's not forget tariffs. If markets perceive trade wars as threatening the global economy, oil demand could be affected, and traders will react accordingly. Fasten your seat belts: it looks like the next few days will be interesting.
This article was written by FL Contributors at www.forexlive.com. Read More Details
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