Oil prices remained largely stable on Monday following gains in the previous trading session, as Iran's violent crackdown on widespread protests effectively reduced market concerns about potential US military intervention in the major oil-producing nation. The development helped ease geopolitical tensions that had previously driven crude prices to multi-week highs.

Current Oil Price Performance

Crude oil benchmarks showed modest gains during early trading hours, reflecting the market's cautious optimism about reduced supply disruption risks.

The February WTI contract is set to expire on Tuesday, with trading activity shifting toward the more active March contract. Prices had reached twelve-week highs last week before beginning to retreat as geopolitical tensions showed signs of easing.

Iran Situation Impact

Iran's deadly crackdown on protests sparked by economic hardship has effectively quelled the civil unrest that had gripped the country. Officials report that the violent suppression resulted in approximately 5,000 deaths, bringing an end to the widespread demonstrations that had raised concerns about regional stability.

President Trump appeared to step back from earlier intervention threats, stating on social media that Iran had called off mass hangings of protesters. However, the country had not announced any such plans previously. This development significantly lowered market expectations of US intervention that could have disrupted oil flows from Iran, which ranks as the fourth-largest producer within the Organization of the Petroleum Exporting Countries.

Market Analysis and Supply Factors

IG market analyst Tony Sycamore explained that the price pullback followed a swift unwinding of the 'Iran premium' that had driven crude to twelve-week highs. The easing was triggered by signs of reduced tensions in Iran's protest situation, combined with bearish US inventory data showing substantial crude stock builds.

US crude inventories increased by 3.4 million barrels in the week ended January 9, according to EIA data. This build significantly exceeded analysts' expectations from a Reuters poll, which had forecast a 1.7 million-barrel draw. The unexpected inventory increase reinforced supply-side pressures on oil prices.

Venezuela Oil Developments

Markets continue monitoring developments in Venezuela's oil sector following Trump's announcement that the US would run Venezuela's oil industry after the capture of Nicolas Maduro. The US energy secretary indicated that the country is moving as quickly as possible to grant Chevron an expanded production license in Venezuela.

However, market confidence remains limited regarding prospects for scaled-up Venezuelan production. Analysts suggest that Venezuela's production ramp-up will require many years to materialize meaningfully, tempering expectations for immediate supply increases from the South American nation.

Ongoing Geopolitical Concerns

Despite the apparent easing of Iran-related tensions, US military forces continue moving toward the Gulf region, underscoring persistent security concerns in the strategically important oil-producing area. This military positioning suggests that while immediate intervention risks have diminished, the situation remains fluid and subject to rapid changes that could impact global oil supply chains.

Oil prices experienced a sharp decline of more than 2% during early Asian trading hours after U.S. President Trump's comments about the situation in Iran helped ease concerns over potential military action and supply disruptions. The remarks significantly reduced market tensions that had been supporting crude prices in recent sessions.

Price Movement and Market Response

Both major oil benchmarks posted significant losses following Trump's statements. The price action reflected immediate market relief over reduced geopolitical tensions.

Both benchmarks had settled more than 1% higher on Wednesday but gave back most gains after Trump's remarks reduced fear of a potential U.S. attack on Iran. The president stated on Wednesday afternoon that he had been told killings of anti-government protesters in Iran were subsiding and believed there was no plan for large-scale executions.

Market Analysis and Outlook

Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, explained that "selling pressure prevailed on expectations that the U.S. would not take military action against Iran." He identified several bearish factors affecting the market:

• Larger-than-expected U.S. crude inventories
• Reduced geopolitical risk premium
• Supply-demand balance concerns

Kikukawa projected that "while geopolitical risks remain high and unforeseen events could disrupt the supply-demand balance, WTI is likely to trade in the $55-$65 range for the time being."

Geopolitical Developments

The United States announced it is withdrawing some personnel from military bases in the Middle East, according to a U.S. official on Wednesday. This decision came after a senior Iranian official said Tehran had told neighbours it would hit American bases if Washington strikes.

Inventory and Supply Factors

U.S. crude and gasoline inventories provided additional downward pressure on prices. The Energy Information Administration reported inventory builds that exceeded analyst expectations.

Adding to the bearish tone, Venezuela has begun reversing oil production cuts made under a U.S. embargo as crude exports were also resuming, according to three sources.

Demand Outlook and Trade Data

The Organization of the Petroleum Exporting Countries stated that oil demand is likely to rise at a similar pace in 2027 as this year. OPEC published data indicating a near balance between supply and demand in 2026, contrasting with other forecasts of a major glut.

China's crude oil import data showed strong performance, with imports rising 17% year-over-year in December. Total imports for 2025 increased 4.4%, with daily crude import volume hitting all-time highs in both December and for the full year 2025.