Oil prices stabilized on Wednesday as traders weighed escalating geopolitical tensions over the U.S. push to take control of Greenland against a backdrop of persistent concerns about global oversupply.
Brent crude held near $64 a barrel, while West Texas Intermediate traded below $60. Prices found some support from a weaker U.S. dollar and firmer time spreads, though the broader outlook remains clouded by expectations of rising inventories and ample production.
The market’s focus is increasingly split between political risks and fundamental pressures. U.S. President Donald Trump's renewed effort to annex Greenland has rattled investor sentiment, dented the dollar, and raised fears of a potential U.S.-European Union trade conflict. Trump is scheduled to address the World Economic Forum in Davos on Wednesday, where his remarks will be closely watched.
“The market is not pricing in full retaliation between the U.S. and the EU, and a compromise is likely,” said Mukesh Sahdev, CEO of XAnalysts Pty Ltd. “Still, in an escalating dispute, the U.S. may hold the upper hand given its economic and energy-supply advantage.”
Meanwhile, supply fundamentals continue to weigh on sentiment. Physical crude grades in the Middle East have softened as OPEC+ producers ramp up output, reinforcing warnings from the International Energy Agency—which will release its latest market analysis on Wednesday—of a looming surplus this year.
“The outlook for a large surplus suggests prices should trend lower, while the potential for a further escalation in U.S.-EU tensions poses further downside risk,” said Warren Patterson, head of commodities strategy at ING Groep NV.
In the physical market, some regional tightness persists due to operational issues, including disruptions at the Caspian Pipeline Consortium terminal in the Black Sea and Kazakhstan's Tengiz oil field, contributing to a near-term shortfall of Mediterranean crude.
Nevertheless, with geopolitical uncertainty and oversupply concerns pulling in opposite directions, oil markets appear poised for continued range-bound trading until a clearer directional catalyst emerges.
