Oil prices nosedived at today's market opening, reflecting that the geopolitical risk premium has been abruptly stripped away. This sell-off appears to be driven by emerging signs of progress in the de-escalation talks with Iran. Investors who had previously factored in the potential for attacks on Middle Eastern infrastructure are now hastily unwinding those hedges. Despite the tensions, the market has reached a sobering conclusion: physical fuel supplies from the Persian Gulf have continued unabated. In fact, traders have called their own bluff, recognizing that the recent support was built on anxiety, not actual barrel shortages. The market is no longer pricing in the nightmare scenario of a war that would close the Strait of Hormuz. Instead, the focus has shifted to a far more mundane—yet depressing—reality: the world is awash in fuel, though appetite for it is waning.
The same bleak truth is echoed by Wall Street's top analysts. Goldman Sachs and JPMorgan predict a substantial oil surplus in 2026, triggered by relentless production growth that is set to outpace demand. Their models suggest this could drag the average Brent cost for the year down to $56–$58 per barrel. Luckster consumption in key economic powerhouses, most notably China, is a major worry for investors right now, as the move towards electric vehicles (EV) and a general dip in GDP growth are chipping away the need for traditional fuels.
In essence, the market is caught in a perfect bearish storm: record US production collides with OPEC+ forecasts that see supply meeting or exceeding global demand next year. The era of scarcity pricing appears to be over, replaced by the mechanics of a glut.
Yet, charts offer a near-term counter-narrative. Although the overwhelmingly negative fundamental backdrop is weighing on Brent crude, the price gap that formed at this week's opening will act as a powerful magnet. Therefore, quotes are poised to rebound and fill this gap in the near future.
The ultimate recommendation is to buy Brent crude from the $66.30 support. Lock in profits at $69.00. Place Stop Loss at $65.20.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
