Oil prices eased on Friday, January 30, with key crude benchmarks slipping more than 1% from multi-month highs, even as the broader market continues to price in elevated geopolitical risk. The US dollar strengthened after comments from President Donald Trump regarding a forthcoming Federal Reserve chair nomination, while tensions in the Middle East and strategic supply concerns kept risk premiums elevated.
Oil prices pull back after sharp rally
- Brent crude futures (BRN1!) fell 91 cents to $69.80 a barrel at 03:32 GMT after Wednesday’s strong 3.4% rally that pushed prices to the highest level since July 31.
- The more active April Brent contract (LCOc2) slipped $1.07 to $68.52.
- U.S. West Texas Intermediate (CL1!) dropped $1.06 to $64.36 a barrel after gaining 3.4% in the previous session to its highest since September 26.
Prices eased as the anticipated escalation — such as a US attack on Iran or disruption to shipping through the Strait of Hormuz — had yet to materialise, according to analysts at LSEG. However, both Brent and WTI are set to record substantial monthly gains: Brent up ~14.7% and WTI up ~12% in January, marking the biggest monthly jumps in years.
Dollar rebounds on US Fed signals and political optimism
The US dollar strengthened on Friday, retracing recent losses, after President Trump said he would soon announce his nominee to head the Federal Reserve and as optimism grew that lawmakers would avoid a government shutdown. A firmer dollar typically exerts downward pressure on commodities, including oil, by making dollar-priced assets more expensive for holders of other currencies.
Geopolitical risk remains elevated
Geopolitical tensions continued to influence sentiment:
- Senior defence and intelligence officials from Israel and Saudi Arabia met in Washington to discuss the situation in Iran, as reported by sources familiar with the matter.
- U.S. forces in the Middle East remain on heightened alert, and Iranian threats of retaliation persist after Trump’s warnings over nuclear issues.
- Despite the rhetoric, U.S. officials have stated no final decision has been made on direct military action against Iran.
Supply disruptions and demand outlook
Analysts highlight several ongoing supply pressures that supported recent oil price strength:
- Combined supply disruptions in Kazakhstan, Russia, and Venezuela affected an estimated 1.5 million barrels per day of crude in January.
- An Arctic weather wave in the U.S. is estimated to have reduced crude and condensate output by approximately 340,000 bpd this month.
Kazakhstan’s Tengiz field is restarting production in stages after earlier outages, while Venezuela’s interim government approved a broad reform of its main oil law. The U.S. also eased certain sanctions on Venezuela’s oil sector, potentially encouraging increased production and investment.
Analyst views
JPMorgan analysts noted that protracted supply disruptions were unlikely, given elevated inflation and upcoming midterm elections. If military action occurs, it is expected to be targeted, avoiding major oil and export infrastructure, they said.
Citi strategists assign a ~70% probability to restrained actions in the near term, such as oil tanker seizures, rather than direct strikes on production facilities.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Commodity market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions.
