Oil markets showed resilience on Monday, with prices edging up amid a volatile landscape shaped by shifting geopolitical decisions and supply concerns. The United States’ reversal of proposed sanctions against Colombia eased immediate fears of supply disruptions, yet investor anxiety remained heightened, fuelled by tensions surrounding energy policy and broader geopolitical manoeuvres.
Brent crude rose to $78.88 a barrel, while U.S. West Texas Intermediate hit $75.01, both climbing 0.5% despite initial dips in early trading. The White House announced the withdrawal of sanctions and tariffs against Colombia after the nation agreed to accept deported U.S. migrants. Colombia, a key crude exporter to the U.S., had shipped 41% of its seaborne oil exports to the country last year, underscoring its strategic importance. However, analysts noted the lingering unease tied to the United States’ aggressive energy diplomacy, with concerns that such strategies could create broader instability in global markets.
Despite these political manoeuvres, the underlying market dynamics remain tight. Analysts highlighted upward pressure on near-term crude prices, reflecting strong demand in a constrained supply environment. While this provided a floor for oil prices, external factors tempered gains. Former U.S. President Donald Trump renewed calls for OPEC to cut prices to weaken Russia’s financial position and expedite an end to the conflict in Ukraine. Trump’s comments, combined with threats of sanctions and tariffs against Russia and its allies, contributed to heightened volatility.
Russian President Vladimir Putin responded by signalling openness to negotiations with Trump, tying discussions on energy prices to broader geopolitical issues. This dynamic injected further uncertainty into oil markets, as traders grappled with potential shifts in U.S.-Russia relations and their ripple effects on global energy supply.
Market watchers also observed that the U.S. appeared poised to boost domestic production while seeking to expand its share of international crude markets. This competitive posture adds pressure on OPEC and its allies, particularly as OPEC+ plans to raise output starting in April. However, the bloc has yet to respond directly to U.S. overtures, maintaining its strategy for gradual production increases.
Meanwhile, Russian crude exports have proven more resilient than anticipated. Analysts at Goldman Sachs noted that elevated freight rates and price-sensitive buyers have supported Russian exports, even in the face of sanctions. JP Morgan warned, however, that risks remain given the significant portion of the global Aframax fleet currently subject to sanctions, reinforcing the need for a cautious risk premium in pricing.
Adding to the complexity, weaker-than-expected Chinese manufacturing data raised fresh concerns about energy demand from the world’s largest importer. These headwinds highlight the intricate balance of geopolitical and economic forces currently shaping oil markets, leaving investors closely monitoring developments.
At its core, the oil market remains highly responsive to shifting global pressures. With the potential for new negotiations and evolving energy policies, volatility looks set to persist, offering both challenges and opportunities for investors in the sector.
Union Jack Oil plc (LON:UJO) is an oil and gas company with a focus on onshore production, development, exploration and investment opportunities within the United Kingdom and the United States of America hydrocarbon sector.
