Sanctions and geopolitical risk to see oil trending higher
US-Iran development
Russia-Ukraine talks in cold waters
Oil prices remain supported by the continued lack of progress in the Russia–Ukraine peace negotiations. The Kremlin maintains that key territorial issues are unresolved, leaving little prospect for a long-term settlement. As a result, sanctions on Russian crude are expected to persist, keeping pressure on global oil flows and contributing to a tighter market.
Ukraine’s sustained campaign against Russian energy infrastructure has further constrained supply. Over the past six months, drone and missile strikes have damaged at least 28 Russian refineries, reduced Russia’s export capacity, and limited its ability to stabilise output. In addition, Ukraine has intensified attacks on Russian tankers since late November, with at least six vessels targeted in the Baltic Sea.
Simultaneously, new US and EU sanctions on Russian oil companies, infrastructure, and shipping have added another layer of restriction, curbing exports and reinforcing the short-term bullish outlook for crude prices.
Opec+ holds the card
Opec+, which supplies roughly 40 per cent of global crude, remains the key stabilising force in the oil market. After restoring about 3 per cent of global output in 2025, the group has paused further increases until Q1-2026. Opec remains optimistic about 2026 demand and is expected to maintain tighter market conditions during the April–September peak-consumption period to keep Brent near $70, supporting member-state revenues. This strategy may conflict with US interests, as lower oil prices would help ease inflationary pressures.
In January, Opec’s crude production declined by 230,000 bpd to a five-month low of 28.83 million bpd. EIA data also shows a tightening market, with the global surplus narrowing to 1.5 mbpd in December from 2.6 mbpd in November.
Asian demand
Asian demand—driven primarily by China and India—will remain a critical determinant of crude oil market performance in 2026. Last year, China accounted for a 4.6 per cent year-on-year (y-o-Y) increase in incremental crude oil imports at 578.98 million tons, while India followed with 3.5 per cent at 248.64 million tons. However, China’s outlook is becoming increasingly uncertain as structural challenges intensify.
Rising debt levels, a deepening real-estate correction, and weakening domestic consumption are expected to temper its crude demand growth. In contrast, India is positioned to be the strongest engine of global economic expansion in 2026, supported by resilient consumption, industrial activity, and ongoing infrastructure investment. As a result, India is likely to play a more influential role in sustaining regional oil demand, partially offsetting China’s slowdown.
Outlook
We maintain a constructive short- to medium-term outlook for crude oil, supported by elevated geopolitical risks and Opec+’s decision to hold production at December levels. This pause is expected to create tighter market conditions during the peak demand period from April to September. As a result, WTI prices could trend toward $70, while Brent may move toward $75, assuming supply discipline and demand resilience continue.
Disclaimer: This story is by Mohammed Imran, research analyst at Mirae Asset Sharekhan. View expressed are his own.
