By Giulia Petroni

Here's a look at what happened in oil markets in the week of Feb. 17-21 and what the focus will be in the days to come.

OVERVIEW: Oil prices slipped on Friday but are still on track for modest weekly gains amid fears of supply disruptions and uncertainties around negotiations to end the war in Ukraine. Brent crude, the international oil benchmark, currently trades at $75 a barrel, while the U.S. oil gauge West Texas Intermediate is at $71 a barrel.

MACRO: According to minutes of the Federal Reserve's January policy meeting, officials were broadly comfortable with their decision to hold interest rates steady. The latest U.S. data showed consumer confidence slid backward this month, reflecting fears that tariffs on goods imports proposed by the Trump administration will lead to price increases.

Higher rates typically boost the U.S. dollar, making commodities like oil more expensive for holders of other currencies. Yet, the dollar weakened this week as investors continue to monitor U.S. tariff plans, providing some support to oil prices.

GEOPOLITICAL RISKS: Supply-side risks have been under the spotlight in recent days following a Ukrainian drone attack on a major pumping station in southern Russia.

On Monday, several drones struck a critical facility of the Caspian Pipeline Consortium, which carries oil from Kazakhstan's Tengiz field to the Russian Black Sea port of Novorossiysk, where tankers are loaded for global distribution. As a result of the attack, oil transit volumes from Kazakhstan could be reduced by about 30%.

Traders are also closely monitoring negotiations between the U.S. and Russia aimed at ending the war in Ukraine. A peace deal could pave the way for the lifting of sanctions and resumption of some Russian exports to Europe. However, some analysts caution that any potential agreement is unlikely to boost Kremlin's oil flows due to limits imposed by OPEC+'s production quotas.

Meanwhile, Bloomberg reported that the Group of Seven is considering tightening the Russian oil price cap in an effort to reduce Moscow's revenues. At the same time, EU envoys agreed on a 16th package of sanctions on Russia.

SUPPLY AND DEMAND: Much of the oil market commentary has revolved around the OPEC+ alliance this week, with traders expecting the group to delay plans to start raising output from early April amid an uncertain economic and geopolitical backdrop.

The cartel and its allies face a number of challenges due to shifting U.S. policy and risks of a trade war, while renewed pressure on Iran and uncertainty around the future of sanctions on Russia add to the complexity. At the same time, global demand remains subdued despite a slight pickup in the fourth quarter of last year and non-OPEC+ growth is expected to remain robust.

On the U.S. front, Trump said this week that he is considering imposing tariffs of 25% or more on automobiles, semiconductors and pharmaceutical products--a move that traders worry could harm the global economy and reduce fuel demand.

The latest data from the Energy Information Administration showed U.S. crude stockpiles rose more than expected last week, while gasoline inventories and distillate fuel stocks fell.

WHAT'S AHEAD: At a macro level, traders will focus on the path of U.S. inflation for more cues on future monetary policy decisions, with the Personal Consumption Expenditures price index set to be released on Friday. Consumer confidence data, initial jobless claims and gross domestic product figures are also due next week.

The market will stay closely tuned to OPEC+ developments as the group is expected to make a decision on output policy by early March, as well as U.S.-Russia talks, tariff news and Kazakhstan's oil exports.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

February 21, 2025 11:57 ET (16:57 GMT)

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