The price of oil futures contracts stabilized around the psychological level of 70 USD per barrel after Friday's decline, while the market continues to face pressures from several geopolitical and economic factors. The beginning of 2025 was relatively strong for oil, but since the second half of January, the price has erased the created increase and returned to the level where it started this year, indicating persistent global uncertainty in the markets.

Economic factors affecting oil prices

One of the main factors behind the price decline is the new tariffs on Chinese imports announced by Donald Trump. The measures have raised fears of a trade war between the US and China, which could slow global economic growth and reduce demand for oil. At the same time, the growth of US oil inventories signals a possible excess of supply, which further pushes prices down.

Another important economic factor is weakening demand from China, the world's largest oil importer. The economic slowdown and restrictions on industrial production have affected Chinese imports, which has reduced demand for oil, especially for the Brent light oil blend.

An interesting indicator of the market is the Brent-Dubai spread, which is at a relatively low level. This price difference between European Brent crude and Middle Eastern crude indicates that the market currently prefers heavier and sulphurous crude oil, which is a consequence of decreasing demand for lighter crude oil and the adaptation of refineries to cheaper raw materials.

Geopolitical tensions and their impact on the market

Geopolitical factors also affect the oil market, with developments in Iraq, China and Ukraine playing a key role.

Iraq has said it could resume oil exports from Kurdistan as early as this week, with daily exports expected to reach 185,000 barrels per day. This move would increase supply in the market, but at the same time it would remain within OPEC limits, which could stabilize the market without significant downward pressure on prices.

The new trade restrictions and tariffs announced by Donald Trump may worsen relations between the US and China. In the event of an escalation of the trade war, a slowdown in global trade could reduce demand for oil, as industrial production and logistics are closely linked to energy consumption.

In addition, peace negotiations between Ukraine and Russia bring another factor of uncertainty. Ukrainian President Zelensky has said he is ready to step down if it guarantees peace, while Trump has begun negotiations with Russia and called for elections in Ukraine. If the agreement with Russia leads to the easing of sanctions, it could increase the global supply of oil, which could again contribute to a decrease in the price of oil on global markets.

OPEC policy and oil production

OPEC and its allies, known as OPEC+, face the challenge of balancing supply and demand as the market approaches a surplus. The organization is likely to postpone the planned production increase, which was originally scheduled for April 2025.

OPEC is expected to continue to cut production to stabilize prices and prevent a further decline. This strategy may keep Brent prices above $70, but if geopolitical tensions ease and demand from China does not recover, downward pressure on prices may continue.

Outlook for the future: Stability or further declines?

In the short term, the development of oil prices will depend on the geopolitical situation, trade relations between the US and China and OPEC's decisions. If the resumption of oil exports from Kurdistan is combined with a continued decline in demand from China and Trump's tariffs weaken global trade, oil prices may continue to fall.

On the other hand, a possible agreement between Ukraine and Russia could ease sanctions and increase the global supply of oil, which would also increase downward pressure on prices.

For investors, the oil market remains highly volatile, with risks related to geopolitics, trade barriers and macroeconomic factors continuing to weigh on price developments. In the coming weeks, it will be crucial to monitor OPEC's decisions, the development of US-China trade relations, and the peace talks between Ukraine and Russia, which will undoubtedly shape the future direction of the oil market.