The global oil market has witnessed a significant uptick in recent days, with West Texas Intermediate (WTI) crude oil prices climbing 6.5% over the past 11 trading sessions. The price surge, which saw WTI rise from $65.27 on March 11, 2025, to an intraday high of $69.57 on March 25, 2025, can be attributed to a combination of geopolitical factors and supply-side concerns.
One of the primary drivers behind the recent oil price rally is the escalating tensions in the Middle East. Israel initiated a new ground offensive in Gaza on March 20, breaking a ceasefire that had lasted nearly two months. This development has reignited concerns about potential supply disruptions in the region, a critical hub for global oil production and transportation.
Additionally, the United States has continued its airstrikes against Houthi positions in Yemen, responding to the group’s attacks on vessels in the Red Sea. These ongoing conflicts have heightened the geopolitical risk premium in oil prices, as market participants factor in the potential for supply chain disruptions.
The U.S. Treasury’s imposition of new Iran-related sanctions has further contributed to the upward pressure on oil prices. These sanctions, which for the first time target an independent refiner, aim to curtail Iranian crude oil exports to China. Analysts from ANZ Bank project that these intensified sanctions could lead to a decrease of 1 million barrels per day in Iranian crude oil exports.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have also played a role in supporting oil prices. The group recently announced a plan for seven members to implement additional output cuts between 189,000 and 435,000 barrels per day until June 2026. This strategy aims to stabilize the market and offset previously announced supply increases, thereby tightening global oil supply.
Recent U.S. government statistics have shown a more significant than anticipated decrease in distillate inventories for the previous week. Distillate stockpiles, which include diesel and heating oil, fell by 2.8 million barrels, surpassing the 300,000-barrel reduction projected in a Reuters survey. This decline in fuel inventories has contributed to the bullish sentiment in the oil market.
Despite the recent price surge, some analysts remain cautious about the long-term outlook for oil prices. Fitch Ratings forecasts that Brent crude oil prices will average $70 per barrel in 2025, with WTI prices expected to be $5 lower. The ratings agency cites factors such as OPEC+’s ample spare capacity and the potential for increased non-OPEC+ production as reasons for a more moderate price outlook.
The recent rally in oil prices reflects a complex interplay of geopolitical tensions, supply concerns, and market dynamics. While short-term factors have driven prices higher, long-term forecasts suggest a more balanced market outlook.
