The oil market is subdued in early trading, having closed lower for two weeks in a row. Tax exemptions on certain electronics by the US initially boosted market sentiment but were tempered by remarks suggesting potential new tariffs.
Constructive Talks Between US And Iran
Constructive indirect talks between the US and Iran over the weekend may alleviate sanction risks on the oil market. The continuation of positive talks could further impact the sector.
Speculators have notably reduced their net long positions in Brent due to ongoing tariff uncertainties. A significant reduction occurred last week with 162,344 lots sold, resulting in 155,838 net long lots remaining.
Falling oil prices are contributing to reduced drilling activities in the US. The country experienced a drop of 9 oil rigs, the steepest since June 2023, bringing the total to 480.
China is set to release its March trade data, covering crude oil imports and refined product trade. OPEC will publish its latest oil market report, and reactions to recent tariff developments may lead to revised demand forecasts.
Oil Market Outlook
With the oil market showing an extended pullback over the past fortnight, its current tone suggests sustained caution rather than an immediate shift in sentiment. Price softness has not developed in isolation—it’s been taking cues from both macro and geopolitical layers, where news flows have been erratic at best. Although early enthusiasm followed the US decision to ease tariffs on select technology goods, that optimism has quickly been dragged down by renewed warnings of additional duties. For now, these mixed signals keep uncertainty levels high and cap any bullish follow-through.
The weekend’s dialogue between Washington and Tehran, described as positive but indirect, has triggered some attention. While there’s no formal agreement, even the possibility of reduced sanctions is enough to recalibrate the medium-term supply outlook. These talks—if they continue to make headway—could eventually allow more crude onto global markets, further softening any upside pressures on prices. That doesn’t mean change is imminent, but the tone is different enough to stay on the radar this week.
Price action has prompted speculative traders to reduce exposure. The latest wave of position shedding in Brent futures last week was striking. Selling of 162,344 contracts led to a drop in net longs by nearly half, leaving positions lighter and more vulnerable to further general risk aversion. That scale of reduction hasn’t occurred in recent months, and it signals how quickly conviction can fade when headline risk escalates. The catalysts can vary—tariff plans, political negotiations—but the effect is uniform: capital takes a step back.
In the US, the ripple effect of softening prices is visible in rig activity. Operators have begun to scale back, with nine rigs taken offline last week—the sharpest weekly cut since mid-2023. This brings the total to 480 active rigs, which is still a stable number, but that pace of decline suggests producers are becoming more budget-conscious with forward spending plans. Lower prices reduce the incentive to expand operations, especially given the balance sheets restructured after the last price slump. It doesn’t change current supply, but it alters future expectations just enough.
We’ll also be watching for hard data from Asia this week. China’s customs report for March is due and will reveal developments in both raw and refined flows. Given the sheer size of their demand base, any drop in import volumes will raise fair questions about industrial activity and stockpiling behaviour. Coupled with that, OPEC’s next monthly report is scheduled and could pull in updated assumptions in light of recent tariffs and slowing demand signals. It’s reasonable to expect adjustments, especially if forecast alignment drifts too far from price realities. Any move in their expectations could be telling.
From a positioning standpoint, there’s now reduced directional commitment. Timing entries or exits will therefore require sharper levels and tighter frameworks, rather than leaning on wider trends. In short, clarity hasn’t returned. We’re still in a period where macro factors deliver short bursts of volatility, without letting a clear trend emerge. For now, that means tighter risk controls, shorter horizons, and more patience around data prints and policy updates.
