Oil Price Rebound: Risk Premium Reassessed
During Friday's Asian trading session, international oil prices rebounded from the previous day's decline as the market factored in the uncertainties in the Middle East. March Brent crude briefly traded above $64 a barrel, with WTI also returning to near $60 levels.
Trump's Latest Remarks Trigger Supply Concerns
The immediate catalyst for the strengthening oil prices came from the latest remarks by U.S. President Trump. Speaking to the media aboard Air Force One, Trump warned Iran while announcing that a U.S. fleet was headed for the region, with reports indicating that an aircraft carrier and several destroyers are expected to reach the Middle East in days. As Iran is a key OPEC oil producer and a major supplier to China, the market is worried that if tensions escalate, export and shipping routes could be affected.
Weekly Gains Expected, But Tug-of-War Continues
On a weekly basis, oil prices are still poised for a fifth consecutive week of gains, though the trend hasn't been one-sided. Reuters reported that oil prices initially fell by about 2% but recovered after the "fleet" news spread, with the weekly gains hovering around 0.6%.
Fundamentally, the market is seeing signs of marginal demand improvement: the International Energy Agency in its January oil market report raised its 2026 demand growth forecast, expecting an annual demand increase of about 930,000 barrels per day.
On the other hand, inventory and demand structure data are capping gains. Reuters mentioned that official U.S. data showed a larger-than-expected increase in crude inventories, while signs of weakening fuel demand have made bulls more cautious.
Additionally, a temporarily weaker dollar usually supports commodities priced in dollars, and changes in market expectations regarding the Federal Reserve's interest rate cuts this year remain a significant "amplifier" of oil price volatility.
What's Next for the Market
In the short term, the focus remains on two lines: firstly, whether there are further signs of escalation in the Middle East that drive risk premiums higher; secondly, whether the rhythm of rebalancing U.S. inventory, refined product demand, and global supply-demand forecasts shifts, determining if the oil price rebound can continue.
