Oil’s Bearish Lurch Has Speculators Betting Worse Is Yet to Come

Easing Premiums

Another red flag is shown in the price of Middle Eastern crude that had been one of the strongest corners of the oil market in the wake of US sanctions on Russian and Iranian barrels. Those values have collapsed relative to the regional Dubai benchmark as a clamor for cargoes to replace sanctioned supplies abates. The premium of Murban, a mainstay for Asian buyers, over Dubai also has narrowed.

China’s crude imports during the first two months of this year were down about 5% from a year earlier. Iranian oil is being delivered to Chinese ports aboard smaller tankers amid mounting pressure from US sanctions.

“Sanctioned flows have continued largely unfazed as the initial disruption has failed to continue for a meaningful duration,” RBC Capital Markets analysts including Brian Leisen and Helima Croft wrote this week. “January’s disruption did in fact cause a physical impact and a change in crude buying behavior, but as we’ve seen time and again since 2023, the shadow supply chain outperformed.”

At the same time, prices for lighter grades of crude have been persistently weak this year as production grows. Kazakhstan is set to ramp up oil exports this month after the expansion of one of the country’s largest fields. More supplies from outside of the OPEC+ alliance are due to come online later in the year, with the International Energy Agency forecasting a surplus even before the group’s most recent move.

Iran Risk

There are reasons to think there are limits to any further declines in oil, however:

• The Trump administration is continuing to threaten a maximum policy on Iran, with Treasury Secretary Scott Bessent recently saying the aim is cut the regime’s oil flows by more than 90%.

• The US has already signaled plans to withdraw Chevron Corp.’s license to pump and sell Venezuelan crude, a move that could potentially remove 200,000 barrels a day of crude from the market.

• The looming threat of fresh flare-ups in the Israel-Hamas conflict amid a US administration more hawkish than its predecessor.

• The US energy secretary is seeking $20 billion to refill the Strategic Petroleum Reserve, a move that would effectively boost demand for barrels.

In addition, there’s the wider question of how far prices can fall before oil production is disrupted. At times this week, US crude for next year was trading in the low $60s, a level not seen since 2023 that begins to menace output growth, traders and analysts said. OPEC+ has also reiterated that its moves can be “paused or reversed subject to market conditions.”

“The only thing that can balance it all is maximum pressure on Iran, but we know Trump wants lower oil prices,” said Gary Ross, chief executive officer of Black Gold Investors LLC. “It doesn’t look like maximum pressure is happening any time soon.”

So far, the fallout from Trump’s economic policies has seen equity markets fall roughly 6% from a high less than three weeks ago. When US consumer confidence fell by the most since 2021 late last month, Brent futures slumped, one of the clearest signs that the de-stabilizing impact of tariffs in wider financial markets is rippling through to crude.

That’s leaving oil’s next path at the behest of more than just supply policy. The next chapter for the commodity may entail an outsize focus on macroeconomic data out of the US and China, the world’s largest crude consumers, according to traders and analysts.

“Tariffs are bearish growth and folks worry about US growth now,” said Aldo Spanjer, a senior commodities desk strategist at BNP Paribas. “It’s a confirmation for all the bears out there. And any bull will not put a position on now.”

Most Read from Bloomberg Businessweek

©2025 Bloomberg L.P.