The oil market has once again taken center stage: prices are rising, but this growth does not resemble the onset of a new commodities rally. Brent is consolidating around $63 per barrel, and WTI is near $59, with prices holding in a relatively narrow range. Meanwhile, the backdrop remains tense: on one hand, geopolitical risks are escalating, and concerns about supply disruptions are mounting; on the other hand, the fundamental picture indicates comfortable stock levels, high supply, and weak demand.

As a result, the market is living in a state of constant balance: short-term news adds a "risk premium" to the price, while structural factors immediately counteract it. Analysts are increasingly talking about a $60–70 Brent range as one where oil might get stuck for an extended period unless radical changes occur on either the supply or demand side.

Infrastructure Attacks and Supply Disruption Fears

The latest upward movement was triggered by attacks on Russian oil infrastructure and simultaneous stalls in peace negotiations. This immediately intensified discussions about supply disruption risks and prompted some players to close short positions and buy oil as a form of insurance.

A symbolic incident revolves around the Druzhba pipeline, through which Russian oil flows to Hungary and Slovakia; the recent attack was the fifth of its kind. The operator and the European side quickly stated that deliveries continue as normal, but the repeated incidents have heightened overall nervousness.

At the same time, consulting firms remind us of the deeper effect of the campaign against refining infrastructure. Market estimates indicate that Russian refining from September to November decreased to about 5 million barrels per day, hundreds of thousands of barrels below last year's figures. Gasoline production has suffered the most, with noticeable cuts in gasoil output. Therefore, risks are felt not only at the crude oil level but also throughout the petroleum product supply chains.

However, it is essential to note that the supply structure is not currently disrupted. There are no major disruptions, and the market understands this: prices are rising modestly, with movements measured in cents rather than dollars. This is a classic example of how geopolitics adds a small but tangible risk premium without fundamentally changing the market's foundation.

Structural Picture

If we look deeper beyond short-term news, it becomes clearer why oil prices are not responding as dramatically to geopolitics as they have in past years.

First, the market has yet to break out of its oversupply mode. Global production is increasing faster than demand, with some regions showing particularly aggressive output growth. OPEC+ has been balancing between supporting prices and protecting market share for several years, and currently, the vector is clearly shifting toward the latter: the cartel is not willing to significantly sacrifice volumes to maintain high prices at all costs.

Second, inventories remain at comfortable levels. Fresh data from the U.S. only confirms this. Instead of the expected decline, commercial crude oil stocks increased by approximately 500,000 barrels last week, despite analysts' predictions of a reduction. This occurred against the backdrop of increased refining activity: refineries are ramping up, yet supply on the market is so abundant that it continues to accumulate in storage.

The fact that reserves are rising even amid geopolitical tensions is a strong signal: there is no physical shortage. For prices, this means a ceiling—whenever Brent approaches the upper limit of the range, more supply enters the market, increasing the willingness to sell, thereby slowing the rise.

Additionally, the position of rating agencies complements the picture. Fitch has revised its oil price forecasts for 2025–2027 downward, directly reflecting expectations of oversupply and an increase in output outpacing demand. This is no longer a one-month story; it's about a cyclical scenario where oil will remain under pressure for years to come.

Persian Gulf: How Oil and Fed Rates Lift Regional Markets

Amidst this backdrop, the reaction of stock markets in Gulf countries is interesting. For them, oil is a key factor, and even a modest rise in prices, bolstered by expectations of future Fed rate cuts, has become a powerful positive signal.

The markets in Saudi Arabia, the UAE, and Qatar ended the session higher. Investors see dual support: on the one hand, higher, albeit moderate, oil prices improve the fiscal positions of these countries and the profitability of energy companies; on the other hand, easing U.S. monetary policy potentially reduces the cost of capital, making investments in emerging markets more attractive.

Regional indices are traditionally sensitive to the combination of "oil + rates." When oil rises and rate expectations fall, it creates an almost ideal formula for short-term capital inflows. In practice, this translates to growth in the energy and financial sectors, with increased interest in infrastructure and industrial issuers tied to government programs and exports.

However, it is crucial to understand that this growth is still based more on expectations than on facts: the Fed has not yet cut rates, and oil prices remain within a range. This suggests that Gulf markets are also vulnerable—both to potential disappointments regarding the Fed and to new signs of oil oversupply.

Balance of War/Politics Against Supply and Demand: Why Oil is Stuck in a Range

The market currently operates within a unique configuration: on one side—war, sanctions, infrastructure attacks, political statements, and stalled peace initiatives; on the other—"comfortable" inventories, anticipated oversupply, and a pragmatic OPEC+ strategy aimed at market share rather than extremely high prices.

In the past, a similar set of geopolitical news might have pushed oil to $80–100 per barrel. However, the current cycle is different. The global economy is slowing, the energy transition is gradually restraining demand growth, and the U.S. and other non-OPEC+ producers are increasing output, while markets are becoming more rational in assessing the risk premium.

War and politics add a few dollars per barrel to prices but do not overturn the market. Their influence is muffled by inventories, expectations of oversupply, and the understanding that any sustainably high price will instantly stimulate even greater production growth.

Scenarios for the Coming Months: Range, Volatility, and Central Banks' Role

Looking ahead a few months, the base scenario appears to be as follows: oil will continue to trade within a range of approximately $60–70 for Brent, periodically breaking to the upper or lower limits on news but returning to the range under the influence of fundamental factors.

Several factors support the maintenance of this scenario:

1. Expectations for the Fed: If a rate-cutting cycle indeed begins soon, it will support commodities overall and oil specifically through dollar weakening and renewed interest in risk assets. However, this does not negate the fact that the physical market still operates with a surplus.
2. OPEC+'s Position: Based on current signals, the cartel does not appear ready to implement aggressive production cuts. Its strategy aims to maintain price ranges at levels where exporting countries' budgets remain manageable, without ceding market share to competitors. This means that in the event of a substantial price drop, we could see more stringent measures, but until the market genuinely tests the lower boundary, there are no grounds for drastic actions.
3. Growing Role of Forecasts and Ratings: Downgrades to price forecasts by major agencies shape market participants' expectations and influence investment decisions; reduced confidence in high prices makes companies more cautious about capital investments and long-term projects. This could, over time, partially alleviate oversupply, but the impact will be delayed.

Conclusion: The Market Operates on "Insurance Plus Oversupply" Logic

The current situation in the oil market is an example of how short-term risks and long-term trends converge into a fragile equilibrium.

On the one hand, infrastructure attacks, pauses in peace negotiations, and overall geopolitical uncertainty create sustained demand for oil as a component of energy security and financial insurance.

On the other side, inventory data, oversupply forecasts, and the OPEC+ strategy aimed at maintaining market share set the price ceiling and kept oil in a range far from the extremes of previous years.

For investors and companies, this means that the bet on a sharp and sustained increase in oil prices now seems weaker than the bet on increased volatility within the corridor and careful risk management. Oil remains a critical global asset, but it is no longer the sole center of gravity for the world market—it is increasingly becoming one of the variables in a more complex equation where interest rates, global economic dynamics, and energy transformation play increasingly significant roles.