First Monthly Gain For Oil In Half A Year Over Venezuela, Iran Angst

But overall, the market remains mired in glut worries: File Image/Pixabay

Oil prices on Friday ended January by posting a 14 percent monthly rise for West Texas Intermediate and a 16 percent monthly climb for Brent, viewed as a major and perhaps long overdue correction in market trajectory.

Stephen Innes, managing partner at SPI Asset Management, explained that January has seen a "repricing of geopolitical risk layered on top of a market that had grown far too comfortable with the surplus story."

Innes went on to remark that the gain was "not because balances suddenly tightened in a structural way, but because the market had underpriced geopolitical optionality and was forced to buy it back in a hurry."

Innes capped his remarks by stating that Venezuela and Iran were "sufficient to shake a market that had been trading as if nothing bad could happen."

In terms of daily trading, Friday saw WTI falling 0.3 percent to settle near $65 per barrel while Brent ended the session slightly above $70, with a modicum of the geopolitical hostilities regarding Iran reduced thanks to U.S. president Donald Trump reporting that the Islamic republic wants to make a deal – presumably a new nuclear agreement.

Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said, "Any signal that he may lean toward diplomacy rather than military action creates immediate selling pressure."

Potentially influencing next week's trading to the bullish side is, once again, severe weather in the U.S.: coastal cities are said to be bracing for a record-setting cold spell to intensify in coming days, meaning possible output disruption and a surge in heating demand.

However, pundits and media are still fixated overall by the anticipated 2026 oil glut, and a monthly Reuters poll released Friday showed that 31 economists and analysts surveyed believe Brent is expected to average $62.02 per barrel this year, with WTI averaging $58.72.

Norbert Ruecker, head of economics and next generation research at Julius Baer, told Reuters, "Geopolitics brings lots of noise but neither the events in Venezuela nor Iran should ultimately alter the big picture.....the oil market appears to be in a lasting surplus."