After Rising 16%, Oil Prices Suddenly Plunge
Oil prices fell sharply after posting their biggest monthly gain since 2022. The market, previously "on the gas" due to geopolitical tensions, suddenly took off the brakes—as traders began to assess the risk of supply disruptions as less likely.
Brent traded around $68/barrel after rising around 16% last month, while WTI held above $63/barrel. This downward trend occurred as market participants monitored Donald Trump's next steps regarding the Middle East, as well as developments in peace talks in Eastern Europe.
From a geopolitical perspective, Trump eased tensions by downplaying the threat of regional war voiced by Ayatollah Ali Khamenei and reiterating his hope that a deal could still be reached with Iran. This softer tone caused the market to shed some of the risk premium that had been attached to oil prices.
According to Haris Khurshid of Karobaar Capital LP, this decline is more like a "repositioning reset" than a fundamental change. The logic is simple: without a new supply shock, oil simply returned its risk premium because the disruption scenario previously priced in by the market hasn't materialized.
Meanwhile, market focus is also turning to the diplomatic process: the next trilateral meeting between the US, Russia, and Ukraine is scheduled for February 4-5 in Abu Dhabi, according to Volodymyr Zelenskiy. However, breakthroughs are still minimal, and the war approaching its fifth year remains a major factor as sanctions on Russia's oil trade have not completely disappeared from the radar.
Previously, oil had rallied for weeks due to escalations that pushed Iran and the US "close to a clash," especially after Trump's threat in January. These tensions rekindled market fears that supply disruptions in the region producing about a third of the world's oil could occur—even though the world is facing a different story: the threat of a global supply surplus.
Beyond geopolitics, sentiment was also influenced by OPEC+'s move to maintain fixed production plans in March (the final part of a three-month "freeze"), despite a brief price surge. Traders also noted the sharp correction in precious metals (gold and silver), which contributed to the "risk recalibration" mode. At 8:07 a.m. Singapore time, Brent was down about 2.4% to $67.64, while WTI was down 2.6% to $63.54—signs that the market is starting to shed risk premiums and return to recalculation mode. (asd)
Source: Newsmaker.id
