Oil prices down due to de-escalation around Greenland and progress on Ukraine

Brent crude oil fell in trading on Thursday, January 22, amid Donald Trump's softening position on duties around Greenland and hopes for progress with the peace deal on Ukraine. The market expects supplies to increase - not only from Russia if sanctions are lifted, but also from Kazakhstan and Venezuela.

The cost of March futures for delivery of Brent crude oil during trading on Thursday fell by 2.5% - to $63.56 per barrel. Prices for U.S. oil WTI, on the contrary, rose by 0.7% in the moment. The key factor for the decline in the cost of Brent was geopolitics, according to Bloomberg and Reuters.

Trump announced on January 21 that he had agreed with NATO on the "framework" of the Greenland deal and withdrew duties against eight European countries that were to take effect on February 1. In addition, the US president said he did not expect further military action against Iran, but "the United States will respond if Tehran resumes its nuclear program." And Ukrainian President Vladimir Zelensky on Thursday announced a trilateral meeting of delegations from Ukraine, the USA and Russia in the UAE on January 23-24.

"In one fell swoop, the president has given the impression that an attack on Iran has become less likely, the Russian war in Ukraine is nearing a cease-fire, and the U.S. is not about to attack Greenland or impose new duties on European countries," said Mizuho analyst Robert Yauger, as quoted by The Wall Street Journal.

The decline in prices looks like profit taking, analysts at Ritterbusch and Associates wrote in a WSJ note. Reduced risk and the likelihood of sooner-than-expected deliveries from Venezuela suggest a further fall in the cost of raw materials, although the forecast of cold weather in the U.S. in the coming days does not allow to exclude a new rise in diesel futures, they believe.

"The geopolitical temperature has dropped a few degrees," said Saxo Bank strategist Ole Hansen (quoted by Bloomberg).

The decline in quotations on Thursday was strengthened by weekly data from the U.S. Department of Energy: oil inventories rose by 3.6 million barrels in the week to January 16 - contrary to expectations of a decrease of 0.5 million barrels, writes The Wall Street Journal. This reflects the abundance of crude available on the market, Bloomberg said.

Meanwhile, Kazakhstan is completing repairs to an oil-loading port on the Black Sea, which is now restricting supplies, the agency wrote. At the same time, export flows from Venezuela are resuming, and Indian refiner Reliance Industries has again purchased Russian crude with deliveries in February-March, it added. The possible lifting of sanctions against Russia in the event of a peace deal would further increase supply in an already oversaturated market, Bloomberg warned

The International Energy Agency on Wednesday raised its forecast for global oil consumption growth to 930,000 bpd from 860,000 previously, citing an improving macroeconomic backdrop and lower prices. However, the agency maintains its forecast for a large surplus in 2026, limiting the potential for a price recovery, the WSJ wrote.

This article was AI-translated and verified by a human editor