Oil Slides Sharply as Geopolitical Fears Fade and Supply Pressures Build

Oil prices ended Thursday with a steep decline, snapping a multi-day rally as easing geopolitical tensions and signs of rising supply shifted market sentiment. Crude had climbed to recent highs earlier in the week, fueled by fears of potential disruptions, but those concerns faded quickly as the outlook softened.


Political Signals Cool the Risk Premium


Markets reacted swiftly after comments from the US president suggested a de-escalation in Iran, easing fears of military confrontation and supply interruptions. The shift toward a wait-and-see approach reduced the risk premium that had been baked into prices, prompting traders to unwind bullish positions built on geopolitical anxiety.


Inventories Add to the Downward Pressure

The pullback was reinforced by fresh signs of ample supply. Data showed a notable rise in US crude and gasoline inventories, signaling weaker near-term demand and easing tightness in the market. The combination of softer geopolitical risks and higher stockpiles weighed heavily on prices throughout the session.


More Barrels Returning to the Market

Adding to the bearish tone, Venezuela began reversing earlier production cuts, with crude exports resuming under expectations of short-term stability. Hopes for smoother relations and fewer disruptions raised the prospect of additional barrels reaching global markets in the coming weeks, further anchoring prices.


Demand Outlook Offers Limited Support

On the demand side, longer-term projections pointed to steady growth rather than a sharp surge, suggesting a near balance between supply and demand ahead. Strong import data from China provided some support, but it was not enough to offset the immediate pressure from rising supply and fading risk concerns.


A Rally Paused, Not Erased

By the close, oil had fallen roughly 4%, ending a five-day winning streak. The session highlighted how quickly sentiment can turn in energy markets, with prices swinging between geopolitical headlines and fundamental supply signals. While longer-term demand remains intact, the near-term outlook has shifted toward caution as the market reassesses risks and available supply.