Oil prices extended their gains as markets assessed the geopolitical implications of US President Donald Trump's threats against Iran and strategic developments in Venezuela's energy sector. The commodity rally reflects growing investor attention to potential supply disruptions and policy changes affecting global oil flows.

Price Movement and Market Dynamics

Crude oil benchmarks posted solid gains during the trading session. The following table shows the key price movements:

Oil futures are heading for a weekly advance following Thursday's rally, which marked the biggest daily increase since October. However, analysts expect a significant surplus this year to create downward pressure on prices in the coming months.

Geopolitical Tensions Drive Market Sentiment

Trump's threat to hit Iran "hard" if the country's government killed protesters during the current period of unrest has added a risk premium to oil prices. The market continues to gauge the potential impact of US actions against Iran on global oil supply chains.

Meanwhile, Goldman Sachs Group Inc. reported that its clients are the most bearish on oil in 10 years, highlighting the mixed sentiment in the market despite recent gains.

Venezuela Energy Sector Developments

Investors are closely monitoring US moves regarding Venezuela following the ouster of President Nicolás Maduro. A high-level meeting is scheduled at the White House on Friday, where nearly 20 oil executives will discuss rebuilding the country's energy sector.

Chevron, currently the only American major permitted by Washington to operate in Venezuela, is loading tankers with Venezuelan crude at the fastest pace in seven months. These cargoes are primarily destined for US refiner Phillips 66.

Trading Activity and Market Flows

Trading houses Trafigura Group and Vitol Group are actively engaging with US refiners to assess interest in purchasing Venezuelan oil. Both companies have obtained preliminary US Treasury licenses to sell these barrels, indicating potential shifts in global oil trade patterns.

The Trump administration's measures could redirect more Venezuelan oil flows to American processors at the expense of Chinese buyers. Chinese refiners, who have been the largest purchasers of heavily discounted Venezuelan crude following US sanctions, are now exploring alternative supply options, including more expensive Canadian crude.

Technical Factors Supporting Prices

Beyond geopolitical developments, technical factors are contributing to oil's bullish momentum. Citigroup Inc. expects the annual period of commodity index rebalancing to drive additional cash flows into oil markets, providing fundamental support for prices.

The combination of geopolitical risk premiums, potential supply chain disruptions, and technical buying interest has created a supportive environment for oil prices, despite longer-term concerns about market oversupply.

Oil prices remain subdued around $50 despite ongoing geopolitical conflicts across multiple regions, with market fundamentals of oversupply and weak demand continuing to dominate pricing dynamics. Ian Bremmer, president of the Eurasia Group, emphasized that global tensions in the Middle East and the Russia-Ukraine conflict have not materially altered the underlying oil market structure.

Market Dynamics Override Geopolitical Tensions

Speaking to CNBC TV18, Bremmer explained that current oil market conditions reflect a well-supplied global market where production capacity exceeds consumption demand. The geopolitical expert noted that even US involvement in Venezuelan oil reserves is unlikely to create near-term supply disruptions or conflicts, given the abundant global supply situation.

China's Strategic Energy Transition

Bremmer highlighted a significant shift in China's energy investment strategy, with the country focusing on post-carbon technologies rather than traditional fossil fuels. China is directing capital toward batteries, nuclear energy, renewable sources, and critical minerals as part of its transformation into what Bremmer described as an "electro state" rather than a petrostate.

This strategic pivot contrasts with continued US investments in oil and gas sectors. Bremmer characterized oil, gas, and coal as "20th-century energies," suggesting China's forward-looking approach to energy infrastructure development.

Trade Policy and Legal Constraints

Regarding trade policy implications, Bremmer expects the US Supreme Court to impose constraints on the use of the International Emergency Economic Powers Act (IEEPA). He noted that the act was not designed for use against more than 90 countries for political purposes, anticipating that the court will neither fully overturn all measures nor provide blanket approval for expansive use.

Economic Outlook and Regional Dynamics

Looking ahead to 2026, Bremmer projected that China's deflationary pressures will intensify, with economic growth driven primarily by exports of competitively-priced manufactured goods. This export-driven model is expected to create substantial trade surpluses while transferring economic pressures to other countries.

Geopolitical Strategy Implementation

Bremmer discussed the implementation of what he termed the "Dondroe Doctrine" in shaping US policy across Latin America, particularly in Venezuela. This approach focuses on securing compliance in areas including oil, drugs, migration, and governance, with potential extension to Nicaragua, Cuba, and Greenland.

Despite rising tensions around oil and tariffs, Bremmer reiterated that fundamental supply-demand imbalances continue to keep oil prices low. He noted that Trump administration officials are looking toward productive engagement with China, including planned meetings with Chinese President Xi Jinping, suggesting potential for diplomatic progress despite trade tensions.