Oil: Between structural abundance and geopolitical tensions, a volatile market to watch

The energy market, particularly oil, is currently caught between abundant supply and geopolitical tensions that strongly influence prices. According to the International Energy Agency (IEA), a record production surplus is expected by 2026, mainly due to the return of OPEC+ production and moderate demand growth, particularly in China. At the same time, economic sanctions against Russia and geopolitical instability maintain upward pressure on prices. Currently, Brent is trading around $67.50 per barrel and WTI around $63.40 per barrel, reflecting relative short-term stability.

Current Economic Environment

• Global supply: OPEC+ is gradually increasing production, contributing to a structural abundance of supply.

• Moderate demand: Consumption remains contained, particularly in China, limiting upward pressure on prices.

• Geopolitical tensions: The situation in Russia and Ukraine and threats of sanctions affect global oil flows, creating disruption risks.

• Price and volatility: Prices are relatively stable in the short term but remain sensitive to any geopolitical or economic changes.

Investment Recommendation

Investing in oil can be relevant for investors looking for exposure to a strategic but volatile market.

• Why?

  • Geopolitical tensions provide opportunities for short-term price spikes, offering potential returns.

  • Structural abundance and oil’s essential role in the global economy ensure long-term demand, particularly in industrial and transport sectors.

  • Investors can diversify their portfolios through direct exposure (ETFs or futures contracts) or via integrated oil company stocks.

Key message: The oil market remains a complex balance between structural surplus and geopolitical risks, offering opportunities for investors who can manage volatility.

Risk Scenario

1. Prolonged price decline: Continued excess supply or a slowdown in global demand could put sustained pressure on prices.

2. Geopolitical volatility: Escalations in Russia/Ukraine or tensions in the Middle East could trigger significant price fluctuations.

3. Energy transition: The rise of renewables and pressure to reduce carbon emissions may lower long-term demand.

4. Macroeconomic risk: Global recessions or slowdowns in China/US could reduce oil consumption.

5. Regulatory and sanctions risk: Additional sanctions or changes in global energy policy could impact trade flows and prices.