Light crude oil futures posted one of their most volatile weeks in months, swinging nearly $4 from a low of $58.45 to a high of $62.36 before settling at $59.17 on Thursday evening—up just $0.05 or +0.08% for the week. The dramatic price action was driven primarily by escalating and then rapidly diminishing geopolitical tensions surrounding Iran, compounded by the resumption of Venezuelan oil exports.
Iran Takes Center Stage as Primary Market Driver
The week’s dominant narrative centered on Iran, where massive protests and a violent government crackdown created the most significant Middle East supply risk since mid-2025. Iran produces approximately 3.2 million barrels per day, accounting for roughly 4% of global crude production. Markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential U.S. military strikes that sent prices surging toward multi-month highs.
The supply risk extends beyond Iran’s own production. The country controls the northern side of the Strait of Hormuz, through which approximately 20 million barrels per day—roughly one-fifth of global production—must flow. Any disruption to this critical chokepoint could trigger a severe supply crisis, which is what speculators were betting on earlier this week.
Trump’s Pivot Triggers Sharp Thursday Selloff
However, the rally abruptly reversed on Thursday…
Light crude oil futures posted one of their most volatile weeks in months, swinging nearly $4 from a low of $58.45 to a high of $62.36 before settling at $59.17 on Thursday evening—up just $0.05 or +0.08% for the week. The dramatic price action was driven primarily by escalating and then rapidly diminishing geopolitical tensions surrounding Iran, compounded by the resumption of Venezuelan oil exports.
Iran Takes Center Stage as Primary Market Driver
The week’s dominant narrative centered on Iran, where massive protests and a violent government crackdown created the most significant Middle East supply risk since mid-2025. Iran produces approximately 3.2 million barrels per day, accounting for roughly 4% of global crude production. Markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential U.S. military strikes that sent prices surging toward multi-month highs.
The supply risk extends beyond Iran’s own production. The country controls the northern side of the Strait of Hormuz, through which approximately 20 million barrels per day—roughly one-fifth of global production—must flow. Any disruption to this critical chokepoint could trigger a severe supply crisis, which is what speculators were betting on earlier this week.
Trump’s Pivot Triggers Sharp Thursday Selloff
However, the rally abruptly reversed on Thursday after Trump signaled he was stepping back from immediate military action. Trump said he had received assurances from “very important sources” that killings and scheduled executions in Iran had stopped. The comments triggered a sharp selloff, with crude prices plunging 3-5% as traders unwound the geopolitical risk premium.
The magnitude of Thursday’s selling reflects concerns over the supply glut that has dominated the market for months. Both Brent and WTI gave back nearly 50% of the rally after Trump’s statement. Despite the pullback, prices remained well above the sub-$60 levels seen a week earlier. Treasury Secretary Scott Bessent announced fresh sanctions targeting Iranian oil trade on Thursday, adding another layer of uncertainty.
Venezuela Adds to Oversupply Pressures
Meanwhile, Venezuela began reversing production cuts and resuming oil exports following the U.S. military operation that removed President Nicolás Maduro. Two supertankers carrying approximately 1.8 million barrels each departed Venezuelan waters this week, marking potential first shipments under a proposed 50-million-barrel supply deal.
However, the market impact has been muted. Venezuela currently produces less than 1 million barrels per day—a shadow of the 3 million barrels per day it pumped in the early 2000s. Any meaningful production increase would require billions in infrastructure investment and years of development. In the near term, the resumption primarily adds pressure to the oversupply narrative rather than significantly altering global supply balances.
Inventory Builds Underscore Fundamental Weakness
Additional pressure came from the Energy Information Administration inventories report, which showed U.S. crude inventories rose by 3.4 million barrels—among the largest weekly builds in months. The report underscores the persistent oversupply that continues to cap rallies. Global supply is projected to exceed demand by as much as 2 million barrels per day in 2026, with the EIA forecasting Brent will average just $56 per barrel for the year.
The trajectory from here depends heavily on how the Iran situation evolves over the coming weeks. Despite Trump’s comments, the Iran crisis hasn’t been taken off the table. The area remains a hotbed and there is still the possibility of a supply disruption. If protests escalate further or Trump reverses course on military action, we could see another sharp rally as the market reprices Iran risk. However, any sustainable move higher would require actual disruption to Iranian oil flows or closure of the Strait of Hormuz—not just the threat of it.
The more likely scenario is that prices drift lower as the fundamental reality of oversupply reasserts itself. With global inventories building, OPEC+ struggling to maintain production discipline, and Venezuelan barrels beginning to trickle back into the market, the structural bearish case remains firmly intact. Even if Iran does experience temporary disruptions, the broader market surplus suggests any rally would be short-lived unless the supply loss is sustained and substantial.
China’s record crude imports in December—which hit all-time highs—have provided a floor under prices and explain why the market hasn’t broken decisively below $55. Chinese demand will be critical to watch in the coming months. If China’s economic stimulus measures gain traction and refinery runs remain elevated, it could provide enough support to keep prices rangebound in the high-$50s to low-$60s.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend turned up this week according to the swing chart when light crude oil futures took out the $60.22 top. It solidified the change in trend when prices blew through the 52-week moving average at $60.83. However, momentum shifted back to the downside when the market broke under both levels.
We are back to square one. Traders need to continue to build a support base above the recent main bottom at $54.70 and we need a sustained rally above the 52-week moving average in order to feed another upside breakout. Otherwise, the market could become rangebound or drift sideways-to-lower.
Weekly Technical Forecast
The direction of the weekly Light Crude Oil Futures market for the week ending January 23 is likely to be determined by trader reaction to $58.46.
Bullish Scenario
A sustained move above $58.46 will signal strong short-covering and renewed buying interest. If this move generates sufficient upside momentum, the 52-week moving average at $60.83 will come into play again. Crossing to the strong side of this indicator could fuel another upside breakout with $63.62 the minimum target.
Bearish Scenario
A sustained move below $58.46 will indicate active selling pressure. This could trigger a sharp decline into the December bottom at $54.70 and put the main bottoms at $50.03 to $49.21 back on the radar.
The Big Question: How Long Can Hope Outweigh Reality?
For now, traders are caught between structural oversupply and acute geopolitical risk. It’s still a speculator’s game and the question is: do they have enough money to continue to prop up the market on geopolitical fears, or will bigger money come in to reestablish bearish positions based on fundamentals? In other words, how long can rallies based on something that hasn’t happened yet last when faced with the reality of ample supply?
The answer likely lies in whether we see actual barrels come off the market. Until then, expect volatility around geopolitical headlines but with a downward bias as oversupply weighs on sentiment. The EIA’s forecast of Brent averaging $56 this year looks increasingly realistic unless the Iran situation deteriorates materially or OPEC+ implements deeper production cuts—neither of which appears imminent.
Technically, if leaning to the bullish side, watch for support to develop around $58.46 then look for another attempt to sustain a rally over the 52-week moving average at $60.84. All bets are off for an upside breakout if traders can’t hold $58.46. It would mean traders have refocused on the supply glut. In this case, it’s going to take renewed threats to Iran to fuel a rally.
