Brent Drops Sharply: Geopolitical Risks Suddenly Cool
Oil prices fell sharply after posting their biggest monthly gain since 2022. In the Asian session, Brent fell around 4% to the $66 area, while WTI weakened to the $62 range—signs the market was beginning to shed its previously strong risk premium.
The primary trigger came from de-escalation signals: Donald Trump said Washington was talking to Iran, while simultaneously downplaying the threat of a "regional war" from Ayatollah Ali Khamenei and reiterating his hope for a deal. When the possibility of conflict subsided, the market immediately cut the risk premium.
Many market participants viewed this decline more as a reset than a major fundamental shift. After a long rally, prices were vulnerable to profit-taking—especially when no new supply shocks were actually realized. The result: oil, which had been rising rapidly, is now "catching its breath" through a rapid correction.
Outside the Middle East, the market is also monitoring developments in the Russia-Ukraine war. Volodymyr Zelenskiy said the next trilateral meeting between the US, Russia, and Ukraine is scheduled for February 4-5 in Abu Dhabi. While previous breakthroughs have been minimal, any progress (or deadlock) remains crucial, as war and sanctions impact Russian oil trade flows.
It's worth remembering that the previous oil rally was driven by an escalation that briefly brought Iran and the US to the brink of conflict—the market at the time calculated the risk of supply disruptions from a region that accounts for a significant portion of global supply. However, once tensions "didn't explode," the focus quickly returned to more structural issues: a relatively well-supplied market and concerns about a global oversupply.
On the supply side, OPEC+ also confirmed its plan to maintain a steady output hold for March (continuing the production freeze phase). The combination of de-escalation signals, restrained but not drastically tightened supply, and the ongoing risk-off sentiment (as evidenced by the sharp correction in gold and silver) made it easier for traders to "sell first, ask questions later." (asd)
Source: Newsmaker.id
