Oil prices held most of the previous session's gains on Monday as market participants balanced short-term geopolitical tensions against concerns that global supply could outstrip demand later in 2026.
As of 22:18 ET (03:18 GMT), Brent crude futures for March delivery were down 0.1% at $65.84 per barrel. West Texas Intermediate crude futures also eased 0.1%, trading at $61.03 per barrel. Both benchmarks had climbed by more than 2% on Friday, a move traders linked to an increase in geopolitical risk premiums.
Geopolitical tension lifts risk premium
Investors moved cautiously after the United States signalled a stepped-up military posture in the Middle East. President Donald Trump said an "armada" of U.S. naval forces - including an aircraft carrier group - was heading toward the region amid rising tensions with Iran. Markets interpreted the deployment as a potential source of disruption to crude shipments from a key oil-producing area.
The broader financial market tone was also affected by recent geopolitical friction involving Greenland, which further unsettled investors and contributed to risk-off positioning in some asset classes.
Supply developments provide mixed signals
On the supply side, pressure on prices eased somewhat after a restoration of output capacity from Kazakhstan. The Caspian Pipeline Consortium said operations at its Black Sea terminal were restored following repairs at a mooring point, allowing exports to resume at normal levels. That development removed a near-term logistical constraint but did not eliminate concerns about medium-term supply dynamics.
Market participants remain wary that production growth, particularly from non-OPEC sources, could outpace demand and contribute to a surplus in 2026. These longer-term supply worries help explain why traders are attentive to data and policy signals that can influence future demand.
Federal Reserve meeting in focus
Traders are looking ahead to a Federal Reserve policy meeting scheduled for this week, which markets widely expect will result in interest rates being left unchanged. Investors will parse the Fed's guidance closely for indications on the timing of potential rate cuts later this year. Expectations about interest rates can affect oil demand indirectly by shaping economic growth prospects and the strength of the U.S. dollar, both of which play a role in crude consumption and pricing dynamics.
With geopolitical risk premiums elevated and supply-side news offering only partial relief, market participants described the current environment as one of competing forces that could keep prices sensitive to both news on the ground and central bank signals in the near term.