Trump Bomb Threat Against Iran Helps Propel Oil To Five-Week High

But analysts remain equally worried about demand ruination also due to Trump: File Image/Pixabay

The seesaw between supply glut worries clashing with equally strong concerns of supply shortages continued to drive crude trading on Monday, with prices climbing to a five week high on fears about hostilities increasing between Washington, Russia, and Iran.

Specifically, analysts worried that U.S. president Donald Trump's tariffs on multiple countries, including Russia, would ruin demand, with Trump's latest tariff threat to the former Soviet Union issued on Sunday in the event Russia and Ukraine can't reach a peace deal and Russia is held responsible.

Morgan Stanley said in a note, "Tariffs and counter-tariffs have the potential to weigh on the oil-intensive part of the global economy in particular, creating uncertainty over demand.

"However, we think this backdrop will probably also cause Opec+ to extend current production quotas once again," even though the Organization of the Petroleum Exporting Countries said this month it would stick to its goal of gradually raising oil output from April.

At the same time, the market abounded with tightness worries stemming from Trump restoring his "maximum pressure" on Iran last week via sanctions on networks shipping oil from the Islamic republic to China.

On Monday, the maximum pressure took a new turn, with Trump telling NBC that if Iran doesn't make a new nuclear deal with Washington, "there will be bombing; it will be bombing the likes of which they have never seen before."

All of this resulted on Monday in Brent settling up $1.11 at $74.74 per barrel, and West Texas Intermediate settling up $2.12 at $71.48; that was the highest close for Brent since February 24 and the highest for WTI since February 20.

Still, Bloomberg pointed out that "Crude is on pace for its biggest monthly loss since September."

For its part, the U.S. Energy Information Administration stated in its latest Short-Term Energy Outlook that both world oil supply and demand will both rise to record highs in 2025 and 2026.

It projected that petroleum production would rise to 104.6 million barrels per day (bpd) this year and 106.2 million bpd next year from a record 102.8 million bpd in 2024; and consumption would rise to 104.1 million bpd in 2025 and 105.2 million bpd in 2026 from a record 102.8 million bpd in 2024.

As for current production, the EIA on Monday stated that crude in January was down 305,000 bpd to hit 13.15 million bpd, a level it hasn't dipped down to in over a year.