Oil Prices Rise Alongside Geopolitical Risk

Oil prices are climbing once again as geopolitical risk rises and the threat of new U.S. sanctions on Russia’s shadow fleet threatens supply.

Oil prices have finally outgrown the pains of the OPEC+ meeting, with the potential threat of sanctions now front and center this week. New G7 sanctions on Russia’s shadow fleet, Chinese concerns about buying Iranian crude with Trump coming into office, and looming nuclear sanctions on Tehran have added some geopolitical risk premium to oil, lifting Brent back to $74 per barrel, posting the first weekly gain since mid-November.

OPEC Adapts to New Bearish Realities. OPEC has revised its global oil demand forecasts for 2024 and 2025 for the fifth consecutive time, seeing next year’s growth outlook at 1.45 million b/d with the changes almost entirely driven by a downgrade of consumption growth across the Middle East.
 
EU Agrees on 15th Russia Sanctions Package. European Union countries have aligned on the 15th package of energy sanctions on Russia over its war against Ukraine, targeting over 30 entities and 45 tankers for their involvement in facilitating Russia’s so-called shadow fleet trade.

ExxonMobil Doubles Down on Oil. US oil major ExxonMobil (NYSE:XOM) has boosted its upstream spending from $27-29 billion in 2025 to $28-33 billion in 2026, eyeing a lift in total production to 5.4 million boe/d by 2030 following the Pioneer acquisition, up 18% from current output levels.

Mexico’s Output Plunges Even Deeper. Recent budget cuts are squeezing Mexican oil production to multi-decade lows, with the most recently reported month of October seeing crude output at 1.42 million b/d, as huge arrears to drilling firms are expected to push production to 1.3 million b/d by now.

Iran Agrees to Tougher Nuclear Oversight. Iran has agreed to more stringent monitoring by the International Atomic Energy Agency at its underground Fordow site, only a couple of days after reports started surfacing about Tehran being able to enrich uranium up to 60% purity, easing tensions.

Canada Wants to Stand Up to Trump. Several Canadian premiers have urged Prime Minister Trudeau to deliver a robust response to Donald Trump’s threat of placing a 25% import tariff on Canadian goods, with Ontario Premier even suggesting exports of both crude and electricity to the US could be halted.

India’s Top Refiner Signs 10-Year Deal with Russia. India’s largest private refiner Reliance (NSE:RELI) signed the biggest ever crude oil supply deal with Russia’s state oil firm Rosneft, agreeing to buy some 500,000 b/d of Russian oil over the upcoming 10 years, with an option to extend for another 10 years.

Shell Tries Its Luck with the Black Sea. Despite a relatively tense geopolitical situation in the Black Sea region, UK-based energy major Shell (LON:SHEL) signed a deal to develop an offshore exploration block in Bulgaria, covering more than 4,000 km2 and abutting Turkey’s giant Sakarya gas discovery.

Chinese Battery Producers Move to Europe. The world’s largest EV battery maker CATL signed a $4.3 billion deal with European carmaker Stellantis to build a large-scale lithium iron phosphate (LFP) battery factory at the latter’s Zaragoza plant in northeastern Spain, the Chinese firm’s third plant in Europe.

Austria Terminates Gazprom Supply Deal. Austrian oil firm OMV (VIE:OMV) terminated its pipeline gas supply contract with Russia’s Gazprom, a symbolic move as Austria was the first Western European country to receive Russian gas in the 1960s, after the two fell out over a $240 million arbitration case.

Asian Demand for Saudi Oil Jumps in January. Following Saudi Aramco’s (TADAWUL:2222) consecutive price cuts to formula prices that led to OSPs being at a 4-year low, Chinese refiners ramped up their nominations of Saudi crude to 46 million barrels, up 25% compared to this month’s 36 million barrels.

Europe’s Leading Trading Firm Sheds Refining. Geneva-based trading firm Gunvor has decided to mothball its 75,000 b/d Rotterdam refinery and will operate the site as a trading terminal, citing escalating operational costs amidst high power prices and elevated inflation rates and weak margins.

Tullow Oil Becomes an Acquisition Target. Following the departure of Tullow Oil (LON:TLW) chief executive Rahul Dhir last week, the Africa-focused producer has been in disarray, with upstream peer Kosmos Energy reportedly weighing an all-share acquisition, potentially doubling its production.