Oil Price Trends: Chart of Decline Under the Influence of a Strongening Dollar and De-escalation of Geopolitical Risks

The global oil market is experiencing a significant correction period. The oil price chart shows a rapid decline, primarily due to two key factors: strengthening of the US dollar and improvements in geopolitical conflicts. March WTI futures (CLH26) lost $3.27 per barrel, a 5.01% drop, while RBOB gasoline contracts (RBH26) decreased by 4.57%. The dollar index (DXY00) reached a weekly high, exerting direct pressure on energy commodities traded in US dollars.

Currency and diplomatic factors as drivers of decline

Amid the dollar’s strengthening, there is also a shift in diplomatic negotiations. The US administration is actively engaging with Iran through Special Envoy Witkoff, whose meeting with Iranian Foreign Minister Abdollah Araghchi is scheduled in Istanbul. Iran has expressed a constructive attitude toward resolving disputes diplomatically. This de-escalation of geopolitical risks in the Middle East has reduced the political risk premiums that previously supported higher oil prices.

Any armed conflict with Iran, one of OPEC’s major members, could potentially disrupt its export flows and threaten the Strait of Hormuz, through which about one-fifth of the world’s oil supplies pass. However, hopes for a peaceful resolution are causing this scenario to recede.

Global supply dynamics: conflicting signals

The global energy picture remains complex. On one hand, Venezuelan oil exports increased from 498,000 to 800,000 barrels per day, expanding global supply. On the other hand, Russia’s production capacity is limited. Over the past five months, Ukraine has struck at least twenty-eight Russian oil refineries and intensified attacks on the Baltic Sea fleet, hitting at least six tankers. New US and EU sanctions further reduce Russia’s export capabilities.

In December, OPEC’s production reached 29.03 million barrels per day, an increase of 40,000 barrels. However, on January 3, OPEC+ decided to pause production increases in the first quarter of 2026, considering the growing oil surplus in the market. The group continues to unwind the 2.2 million barrels per day cut introduced at the start of 2024, of which 1.2 million barrels remain unrecouped.

Reserves, infrastructure, and the US market

According to the latest EIA data, US crude oil inventories were 2.9% below the five-year seasonal average, while gasoline stocks remained 4.1% above normal. US production stood at 13.696 million barrels per day, slightly below the November peak of 13.862 million. The number of active drilling rigs in the US remained at 411, still above the December low of 406.

Vortexa data shows that the volume of oil on anchor tankers for more than a week decreased by 6.2% to 103 million barrels. This indicates an improvement in transportation and logistics conditions.

Market outlook and expectations

The International Energy Agency recently revised downward its forecast for the global oil surplus in 2026 to 3.7 million barrels per day. The US Energy Information Administration, in turn, increased its forecast for US production in 2026 to 13.59 million barrels per day.

In the near term, oil prices will be influenced by the balance of several factors: the further trajectory of the dollar, the outcome of Iran negotiations, decisions by OPEC+ at the upcoming weekend meeting, and the impact of Ukrainian attacks on Russian oil infrastructure. Diplomatic breakthroughs in the Middle East and recovery of Venezuelan exports create tailwinds for oil prices, although restrictions on Russian supply remain a supporting factor.