Oil prices poised for strong weekly rally as supply shock deepens

CRUDE oil prices remain firmly on track to post another weekly gain, even after easing slightly from the sharp highs recorded on Thursday, as persistent supply disruptions continue to dominate market sentiment.

At the time of writing on Friday at 5.42pm Nigerian time, Brent crude was trading at $108.4 per barrel, while West Texas Intermediate (WTI) stood at $102.3 per barrel. The price gap between the two global benchmarks has narrowed again, reflecting shifting trade flows and tightening market fundamentals across regions.

On Thursday, Brent crude surged above $126 per barrel at one point and held close to $125 for most of the session, underscoring the intensity of bullish pressure in the market. The benchmark has now climbed more than 40 percent since the outbreak of war in late February, highlighting the scale of the geopolitical risk premium currently priced into oil markets, Oilprice.com reported.

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Developments in the Middle East continue to reinforce expectations that prices could remain elevated for longer. Reports on Thursday indicated that President Donald Trump was set to receive briefings on the possibility of further U.S. military strikes on Iran. In response, a senior official from Iran’s Revolutionary Guards Corps issued a warning of ‘long and painful’ retaliatory actions against the United States, raising fears of a prolonged escalation that could further disrupt energy supplies.

Adding to the pessimistic outlook, Iran’s Foreign Ministry spokesman, Esmaeil Baghaei, cautioned that any near-term resolution to the conflict remains unlikely. He stressed that expecting a quick diplomatic breakthrough, regardless of the involvement of international mediators, would be unrealistic under current conditions.

Market analysts say the breakdown in diplomatic engagement is a critical factor shaping price expectations. Analysts at ING noted that stalled talks between the United States and Iran, alongside reports that Trump rejected a proposal to reopen the Strait of Hormuz, have significantly reduced hopes for a swift normalisation of oil flows through one of the world’s most critical energy corridors.

The disruption to supply is already having a measurable impact on global balances. ING estimates that higher prices have begun eroding demand by roughly 1.6 million barrels per day, as consumers and industries adjust to rising energy costs. However, this demand destruction remains modest compared to the scale of supply losses.

According to data from Vortexa, the global oil market is currently facing a net supply deficit of around 9 million barrels per day, a shortfall that far exceeds the reduction in consumption. This imbalance is forcing countries to draw heavily on existing inventories, leading to a rapid decline in global oil stockpiles.

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The tightening of inventories is further amplifying bullish sentiment, as lower stock levels reduce the buffer available to absorb future shocks. Traders and analysts warn that unless there is a meaningful de-escalation in geopolitical tensions or a coordinated effort to boost production, oil prices could remain volatile and elevated in the near term.

Overall, the combination of escalating geopolitical risks, stalled diplomacy, and a widening gap between supply and demand continues to underpin the upward trajectory in crude prices, setting the stage for another strong weekly performance in global oil markets.