The Commodities Feed: Oil rebounds as geopolitical risks linger
The desk believes that oil's recent rebound is underpinned by persistent geopolitical risks, specifically surrounding the US-Iran situation, despite bearish inventory data that typically pressures prices. Per the full note , oil prices rose after dipping below $90/bbl, bolstered by these geopolitical uncertainties even as the API reported a surprising 9 million barrel increase in US crude stocks. Our internal coverage highlights that expectations for oil prices are closely tied to these developments and the potential for shifts in sentiment, which could affect associated FX pairs like EUR/USD, GBP/USD, and USD/JPY.
What the desk is arguing
The desk frames this as a critical moment for oil prices, pivoting around geopolitical tensions rather than purely supply-demand mechanics. The focus on the US-Iran conflict suggests that traders might be navigating uncertainties that could lead to price adjustments in either direction, influenced predominantly by geopolitical developments.
Supporting this notion, API figures revealing a substantial increase in crude stocks serve as the backdrop for market movements, which indicates a tense balancing act as traders weigh geopolitical concerns against bearish supply data. With upcoming EIA data likely to provide further insights, this will be crucial for market participants.
Where it sits in our coverage
Our consensus on the EUR/USD target stands at 1.1400 with a range of 1.1000–1.2000. Notable forecasts include rbc at 1.2000 and hsbc suggesting 1.1000 for Dec-26. This demonstrates a slightly bullish view amid the prevailing economic conditions.
The current desk view aligns closely with the cross-firm consensus, especially given the mixed sentiment in expectations around oil prices and their indirect impact on these pairs. The desk's perspective appears to resonate with projections from key firms like nomura, indicating a progressive alignment with the market trajectory anticipated by investors.
How other firms see it
Firms such as rbc and bofa have positioned themselves in tandem with this geopolitical narrative, which adds weight to the desk's tone. Conversely, firms like barclays express a more cautious stance, as they anticipate more volatility stemming from economic data releases.
The trajectory of the GBP/USD, influenced by BoE rate decisions, is likely to respond to any significant shifts in commodity prices due to their impact on inflation and monetary policy direction. With oil's influence on inflationary pressures, this currency pair may react sharply to evolving oil market dynamics.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil rebounds due to geopolitical risks despite bearish inventory data.
- 02Surprising increase in US crude stocks adds complexity to market dynamics.
- 03Expectations for EIA data could further influence oil prices and associated FX markets.
- 04Key currency pairs remain sensitive to oil price fluctuations.
Market implications
Watch for any significant changes in oil pricing, particularly if it breaks through pivotal levels like $90/bbl. The upcoming EIA data release will likely act as a major catalyst for directional shifts in both oil and related currency pairs like EUR/USD and GBP/USD.
Risks to this view
A rapid de-escalation in geopolitical tensions in the Middle East or positive supply signals from the EIA could overturn the current sentiment around oil prices, leading to a sharp reversal in trading positions and impacting FX strategies linked to oil pricing.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Neutral | 1.1200 |
UniCredit | Bullish | 1.1600 |
Rabobank | Bearish | 1.1000 |
Articles The Commodities Feed: Oil rebounds as geopolitical risks linger Published 08:00 Commodities daily Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices edged higher this morning after falling below $90/bbl yesterday, supported by lingering US-Iran uncertainty despite bearish inventory data Ewa Manthey and Warren Patterson Oil edges higher as Middle East uncertainty persists Energy – Oil edges higher as Middle East uncertainty persists Oil prices edged higher in early trading today after falling below $90/bbl yesterday. While expectations of improving Middle Eastern supply availability and bearish US inventory data have weighed on the market, uncertainty around the US-Iran conflict continues to provide some support. US inventory data added to the bearish tone.
API figures showed crude stocks increasing by 9m barrels last week, compared with expectations of a draw of around 0.6m barrels. Inventories at Cushing rose by 182k barrels, while gasoline stocks were broadly unchanged and distillate inventories increased by 1.5m barrels. Attention now turns to official EIA data due later today.
The latest EIA outlook also points to continued growth in US supply. The agency marginally lowered its 2026 crude production forecast to 13.86m b/d, still around 200k b/d higher year-on-year, while its 2027 forecast remains at 14.3m b/d, implying growth of roughly 440k b/d. US petroleum demand is expected to remain broadly flat at 20.6m b/d this year before increasing to 20.9m b/d in 2027.
The EIA also raised its gasoline and diesel price forecasts for next year, reflecting continued tightness in fuel markets. There are also signs that Middle Eastern producers expect supply conditions to improve. ADNOC has reportedly reduced the premium for December-loading Murban crude to $4/bbl, following price reductions from Saudi Aramco.
The EIA expects most Middle Eastern production outside Iran to recover to pre-conflict levels by the middle of 2027. However, supply risks have not disappeared. Reports of further damage to Russian energy infrastructure following Ukrainian drone attacks add another source of uncertainty, with several refineries reportedly facing disruptions since late October.
For now, developments in the Strait of Hormuz remain the key driver for the oil market. An improvement in regional flows would allow more of the geopolitical premium to unwind, although continued disruptions leave the market vulnerable to renewed upside. Metals – Gold recovers as physical demand provides support Gold edged higher in early trading on Wednesday after coming under pressure from a stronger dollar and a sharp rise in US Treasury yields.
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