Crude Oil Rallies on Dollar Weakness and Heightened Geopolitical Risks

Today Markets UAEJanuary 24, 2026

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March WTI crude oil (CLH26) on Friday closed up +1.71 (+2.88%), and March RBOB gasoline (RBH26) closed up +0.0307 (+1.67%).

Crude oil and gasoline prices rose sharply on Friday, with crude oil posting a 1-week high. Friday’s slump in the dollar index (DXY00) to a 3.5-month low is supportive for energy prices. Also, an increase in geopolitical risks is boosting crude prices after Russia threw cold water on hopes of a breakthrough in peace talks with Ukraine and after President Trump revived the possibility of US military action against Iran.

Crude prices rallied on Friday after the Kremlin said the “territorial issue” remains unresolved with Ukraine and there’s “no hope of achieving a long-term settlement” to the war until Russia’s demand for territory in Ukraine is accepted. The outlook for the Russia-Ukraine war to continue will keep restrictions on Russian crude in place and is bullish for oil prices.

Crude also garnered support Friday after President Trump revived his threats to use military force against Iran for its violent crackdown on protesters, saying an armada of US Navy vessels was en route to the Middle East.

Crude prices also rose on Friday after the Financial Times reported that the US is threatening to curb the supply of dollars for Iraqi oil sales as it pressures Iraq’s leading politicians to form a government that excludes Iran-backed militia groups.

Unrest in Iran, OPEC’s fourth-largest producer, is also underpinning crude prices as Iranian security forces have killed thousands of protesters, and President Trump threatened attacks on Iran if the killing of protesters continues. Reuters reported last Wednesday that some US personnel have been advised to leave the US Al Udeid Air base in Qatar. The facility was targeted by Iran in retaliatory airstrikes last year after the US attacked Iran’s nuclear facilities. Iran, OPEC’s fourth-largest producer, produces more than 3 million bpd, and its crude production could be disrupted if the protests against the government worsen and the US decides to strike government targets.

Crude oil has carryover support from Tuesday, when Reuters reported that Kazakhstan’s Tengiz and Korolev oil fields would be shuttered until next week due to power generator fires. Kazakhstan has curbed some 900,000 bpd of crude production that feeds the Caspian Pipeline Consortium terminal on Russia’s Black Sea Coast due to drone strikes.

The IEA on Wednesday cut its 2026 global crude surplus estimate to 3.7 million bpd from last month’s estimate of 3.815 million bpd. Last Tuesday, the EIA raised its 2026 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month, and cut its US 2026 energy consumption estimate to 95.37 (quadrillion btu) from 95.68 last month.

Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -8.6% w/w to 115.18 million bbl in the week ended January 16.

Strength in Chinese crude demand is supportive for prices. According to Kpler data, China’s crude imports in December are set to increase by 10% m/m to a record 12.2 million bpd as it rebuilds its crude inventories.

Crude garnered support after OPEC+ on January 3 said it would stick to its plan to pause production increases in Q1 of 2026. OPEC+ at its November 2025 meeting announced that members would raise production by +137,000 bpd in December, but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC’s December crude production rose by +40,000 bpd to 29.03 million bpd.

Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past five months, limiting Russia’s crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.

Thursday’s EIA report showed that (1) US crude oil inventories as of January 16 were -2.5% below the seasonal 5-year average, (2) gasoline inventories were +5.0% above the seasonal 5-year average, and (3) distillate inventories were -0.5% below the 5-year seasonal average. US crude oil production in the week ending January 16 was down -0.2% w/w to 13.732 million bpd, modestly below the record high of 13.862 million bpd from the week of November 7.

Baker Hughes reported Friday that the number of active US oil rigs in the week ended January 23 rose by +1 to 411 rigs, just above the 4.25-year low of 406 rigs posted in the week ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.