Oil prices closed lower on Friday, but above $80. The market reacted to a ceasefire agreement in Gaza and the strengthening of the dollar. Despite this, analysts point out that geopolitical tensions and OPEC forecasts could support the price of oil, which remained stable throughout the week.
The oil has been one of the biggest focuses of attention in recent months, and Friday (17) was no different.
With the commodity closing lower but remaining above US$80 per barrel, the volatile behavior of oil has left analysts attentive and curious about what is really influencing the market.
Political, economic and, of course, supply and demand factors continue to shape this volatile landscape. Why are prices fluctuating, and what does this mean for the immediate future of the industry?
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The Impact of the Gaza Ceasefire on the Oil Market
According to portal Wow, The main news on Friday was the approval of the ceasefire between Israel and Hamas in the Gaza Strip. The agreement, which had been under negotiation for days, was finally approved by the Israeli government, which generated an immediate reaction in the financial market.
Investors, who were fearful of an escalation in the Middle East, saw the approval of the ceasefire as a relief in geopolitical tensions.
The decline in risk premiums associated with this region caused oil to experience a slight decline in trading on the day.
However, analysts warn that the effect of the ceasefire on the oil market should be seen as temporary.
The war between Israel and Hamas has had a major impact on market uncertainty, but the reduction in tensions does not mean that the oil market will be immune to other geopolitical events, such as relations with Iran and the war in Yemen, which could still affect supply.
The Strength of the Dollar: What Does It Have to Do with Oil?
Another relevant factor that directly impacted the closing price of oil on Friday was the strengthening of the dollar.
Oil, being a commodity traded in dollars, typically comes under pressure when the US currency appreciates.
This happens because oil becomes more expensive for foreign buyers, which reduces demand and can lead to a drop in prices.
This upward movement in the dollar was driven by a number of economic factors, including more robust growth data in the United States, which indicate stronger than expected economic performance.
As a result, investors are moving to safer assets such as the dollar, which is putting downward pressure on the price of oil.
However, despite this pressure from dollar, Oil still closed the week higher, showing that there are other factors sustaining the price of the commodity above the US$80 mark.
OPEC’s Role in Oil Prices: What to Expect?
The Organization of the Petroleum Exporting Countries (OPEC) also has a major influence on the price of oil.
OPEC recently revised its production forecasts for next year, pointing out that the oil market could be facing a significant supply deficit.
This is because oil production is unable to keep up with global demand, which continues to grow.
According to experts at Commerzbank, OPEC could have to reverse its production cuts to meet rising demand.
However, the organization is cautious, as forecasts for increased production could be influenced by international sanctions against countries such as Iran, Venezuela and Russia.
If production in these countries is affected by sanctions, OPEC could find it difficult to meet global oil demand.
Iran and Russia: The Energy Partnership That Could Shake Up the Oil Market
In recent months, there has been a significant increase in relations between Iran and Russia, particularly in the energy sector.
Both countries, which face heavy international sanctions, have been working together to expand their oil production and export capabilities.
The partnership between Iran and Russia has the potential to change the dynamics of the oil market, especially with regard to the supply of the commodity.
These two countries can provide more oil to the global market, but this depends on the continuation of sanctions and the ability of countries to maintain their production without major external interventions.
Their rapprochement could also have long-term geopolitical implications, making the oil market even more unpredictable.
The Impact of the Fall of Oil Rigs in the US
Another fact that cannot be ignored is the decline in the number of oil platforms in operation in the United States.
According to data from Baker Hughes, the number of active rigs fell to 478, which represents a decrease from the previous week.
This decline in drilling activity could reduce oil supply in the coming months, which puts pressure on prices and could result in a rise in the price of a barrel.
As the US is one of the largest oil producers in the world, any decrease in drilling rigs could upset the balance between supply and demand, significantly impacting the global oil market.
Predictions for the Future of Oil: What to Expect?
Despite the slight drop recorded on Friday, the outlook for oil in the near future is still positive.
With the possibility of supply disruptions from major producing countries such as Iran, Venezuela and Russia, and with geopolitical uncertainties continuing to loom over the Middle East, the price of oil has a good chance of remaining high throughout 2025.
Experts at Swissquote and ING, for example, believe that prices will continue to rise due to increasing pressure on supply.
Do you think the oil market will continue its upward trajectory or will prices fall in the coming months? Leave your opinion in the comments!