Crude oil outlook: WTI to slowly retreat toward $57-$58/b, believes analyst

Crude oil outlook: Geopolitical tensions have driven crude oil prices to a three-month high, with WTI trading just under $63 and Brent approaching the $67 resistance level

Global crude oil outlook: Geopolitical tensions, weather disruptions, and persistent supply surplus

Geopolitical tensions have driven crude oil prices to a three-month high, with WTI trading just under $63 and Brent approaching the $67 resistance level. The rally is further supported by a sharply weaker US Dollar Index, now near a four-year low, which is typically bullish for energy commodities. 

 

Additional upward pressure comes from rising concerns over potential US military action against Iran, a development that could threaten supply from Opec’s fourth-largest producer. These combined factors have strengthened market sentiment, keeping crude prices elevated despite broader macroeconomic uncertainties.

Arctic blast affects crude oil output

Severe freezing weather across major US producing regions has sharply disrupted energy output, shutting in an estimated 1.5–2 mbpd of crude production. The cumulative loss is expected to reach nearly 9 million barrels, with full recovery unlikely before January 30. West Texas operations were hit particularly hard, as extreme cold hindered oil and gas extraction. The Arctic blast also impacted the southern central corridor, taking about 22 per cent of natural gas production offline. Total outages peaked near 2 million bpd, intensifying concerns over near-term supply tightness and adding upward pressure to energy markets.

Opec+ decision to halt restoration

After restoring about 3 per cent of global supply—roughly 2.9 mbpd—between April and December last year, Opec+ effectively pushed the market into a surplus of nearly 1.5 mbpd by the end of 2025. In response, the group has decided to halt further incremental output and maintain current production levels to stabilise market conditions, especially as the January–March period historically sees softer crude demand due to weaker industrial activity. Opec+ still has about 1.2 mbpd left to restore but is expected to keep production steady when it meets this weekend to review policy. Meanwhile, Opec’s December crude output rose by 40,000 bpd, reaching 29.03 million bpd.

Renewed geo-political risk

US actions in Venezuela and renewed signals of possible military engagement with Iran have heightened geopolitical risk in the Middle East, a region accounting for one-third of global oil supply. This has added a significant risk premium, pushing crude prices up nearly 11 per cent over the past month. 

 

At the same time, continued Ukrainian drone and missile strikes on Russian energy infrastructure— including at least six tanker attacks in the Baltic Sea—pose ongoing supply risks. New US and EU sanctions on Russian oil companies and tankers have further constrained exports, tightening the short-term

Global demand supply outlook

The global oil market is expected to remain in a surplus of over 2 mbpd unless Opec+ adjusts its production policy. Non-Opec producers—mainly the US, Brazil, Canada, and Guyana—are set to add about 1 mbpd of new supply this year. With demand near 104.5 mbpd and supply reaching 105.5–106 mbpd by end-2026, the surplus is likely to persist.

Outlook

The renewed short-term concerns have already pushed crude prices up by 11 per cent this month, and we still see scope for a further 4–5 per cent upside. However, the medium-to-long-term outlook remains moderate. The week-long Lunar New Year holiday in China is expected to dampen industrial demand, while US consumption trends continue to reflect weakening consumer spending. As these factors weigh on fundamentals, we expect WTI to gradually retreat toward $57–$58/b in the coming weeks, with the long-term target steady at $50–$52/b.

 

(Disclaimer: This article is by Mohammed Imran, research analyst, Mirae Asset Sharekhan. Views expressed are his own.)