ICE Brent is nearing $70/bbl as uncertainty over Iran and OPEC+ output cuts support prices, despite a large US stock build. Refinery margins firmed after reports of a Ukrainian drone attack on Lukoil’s Volgograd refinery in Russia, with capacity of 300k b/d.
OPEC kept demand growth forecasts unchanged for 2026 and 2027 at 1.38m b/d and 1.34m b/d. OPEC+ output fell 439k b/d month on month in January to 42.45m b/d.
Kazakhstan Supply Recovery
Kazakhstan’s oil output is set to recover through February after power issues at the Tengiz and Korolev fields were resolved. Repairs at the CPC terminal are also expected to lift loadings.
February CPC loadings are forecast at 1.15–1.25m b/d, up from 907k b/d in January. March loadings are expected at 1.55–1.65m b/d.
Canadian crude discounts have widened, and Indian demand is shifting away from Russian barrels after the US–India trade deal. The scale of any reduction in India’s purchases, and how much Russia can redirect to other buyers, remains a key market factor.
We see oil prices finding solid support, with ICE Brent now testing the $70 per barrel level. The market seems to be ignoring bearish signals, such as the massive 12.1 million barrel build in US crude inventories reported by the EIA for the week ending February 6. Geopolitical risks, from uncertainty around Iran to drone attacks on Russian refineries, are currently the dominant force, making bullish option strategies like call spreads attractive.
Positioning And Risk Management
Looking forward, OPEC remains confident in its demand growth forecasts for this year, which supports prices on longer-dated futures contracts. Their commitment to supply management was clear last month, as January 2026 figures showed compliance with production cuts at a very high 115%. This strong discipline is a key reason we have recovered from the price dips seen in the fourth quarter of 2025.
However, traders should prepare for new supply to hit the market very soon. Exports from Kazakhstan’s CPC terminal are set to recover this month and rise significantly in March to over 1.5 million barrels per day. This scheduled increase in supply could easily cap the current rally, suggesting that selling out-of-the-money calls or buying protective puts could be a prudent hedge.
A key factor to monitor will be Indian demand for Russian oil following the recent US-India trade agreement. A significant reduction in these purchases could force Russia to find other buyers, potentially at a discount. This could add unexpected downward pressure to the market later this year, influencing longer-term positions.
