Oil prices have reached a three-month-high due to simultaneous geopolitical tensions in Venezuela and Iran, as well as the Black Sea. This has created a dangerous environment for investors, even though a massive supply glut is still hanging over the market. Brent crude opened the year at $61 per barrel, before falling below $60 when U.S. president Donald Trump surprised the world by removing Venezuelan President Nicolas Maduro. The drop was due to expectations that Washington would restore oil production and exports from a country with the largest proven reserves in the world. Once the few details about 'U.S. As details of the U.S.

Trump threatened to intervene on behalf of protesters facing a brutal crackdown in Iran. The situation pushed prices up 9% in one week, to $66 per barrel. The immediate threat is a disruption of supply in an environment that is volatile and unpredictable. While a regime change in Tehran may eventually lead to more crude being available on the market, this could be delayed until if there was a regime change. Drones have added to the tensions in the Middle East, and elsewhere, by attacking two oil tankers on the Black Sea, including one chartered for the U.S. energy giant Chevron. The tanks were approaching a Russian coast terminal that handles the majority of Kazakhstan's crude imports. The perpetrators are still unknown. The U.S. seized a Russian flagged vessel last week in the Atlantic, which increased the risk of more oil being drawn into conflict. These supplies could be huge. In 2025, combined oil exports from Venezuela and the Black Sea could reach 4.6 million barrels a day - approximately 4.5% of world supplies. Energy markets are less willing to factor in geopolitical risks in recent years. However, this figure is one that traders cannot ignore.

Back to?Hormuz Among these geopolitical threats, Iran is the most significant. This is because the conflict could threaten the Strait of Hormuz - the narrow waterway that runs near Iran and through which 20% of the world's oil and gas are shipped. Tehran will not take this "nuclear" option, however, because it would shut down its crude oil exports. It would also likely prompt a swift response from the U.S. This was likely the regime's calculation during last year's 12-day Israel/Iran war. Iran still has options. It could target?regional U.S. ally. Tehran's attack on a U.S. military base in Qatar was met with a decline in oil prices in June. A repeat could have a different impact now. In 2019, an Iranian drone attacked Saudi Arabia's Abqaiq facility, knocking 5% of the global supply out for several weeks. This led to a sharp spike in oil prices.

FORGET THE GLUT? Although the 9% increase in crude oil prices over the last week is noteworthy, they still remain within a fairly narrow range that they have been trading in for months. Why hasn't the 2026 explosion of geopolitical conflict caused a greater increase in crude prices? It is because the increase in global crude oil supplies coincides with a sharp rise in demand. The U.S. energy?information administration expects global inventory to grow by an average of 2,8 million barrels per a day in 2026. According to Kpler, the volume being transported by tankers in recent months has increased significantly to around 1.3 million barrels. This is the highest level since mid-2020 when global consumption plummeted due to COVID-19 locksdowns. When supply exceeds demand, "oil-on-water" is more common.

Around a quarter of this volume currently comes from Iran, Russia, and Venezuela. These are sanctionsed supplies, which would take longer to be purchased.

The figure is still?high, but there are signs that crude and product inventories in the land also continue to rise.

The oil price curve suggests that traders do not expect a large build.

In recent weeks, the price of Brent crude has shifted to a structure called backwardation. This means that they are trading at a higher premium than contracts for delivery towards the end 2026.

Contango is a structure whereby the immediate price must be lower than the future price to make storage profitable. The discrepancy between the physical market's price curve and its actual value is likely due to the inability to see the "shadow fleet" or large tankers that transport sanctioned oil, as well as China’s opaque storage.

In addition, traders will also have to?speculate on the possible outcomes of the complex and rapidly changing political situations in the three main oil-exporting countries, before determining the likely impact of the situation on supply. Investors are faced with a wide range of outcomes and prices will remain volatile until some of these questions are answered.

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(source: Reuters)