Oil markets appear rangebound by geopolitics, but the dominant forces at work are structural and macro-driven. What matters most right now is not what policymakers want, but the trends already in motion across commodities, supply, and financial markets.
Price-making power has shifted to the Western Hemisphere. When prices rise, producers respond by selling forward and bringing on supply, a dynamic that has kept curves in backwardation for years. Excess liquid fuel supply from the U.S. and Canada continues to build, reinforced by additional growth from Latin America. This isn’t unique to crude oil, it’s visible across natural gas, grains, and much of the commodity complex.
Historically, commodities don’t bottom until prices move below breakeven costs. In oil, that process shuts in excess supply, increases demand, and resets the market. Without that reset, rallies tend to be temporary. That pattern has played out repeatedly, and there’s little evidence this cycle will be different.
These trends also happen to align with policy realities. The world’s largest producer and exporter of energy, food, and raw materials benefits from lower prices. Importantly, those lower prices were already developing before current leadership took office. Policy does not need to create the trend when the trend already exists.
Financial markets add another layer of risk. Equity volatility remains historically low, a condition that rarely persists. As volatility rises, commodities, already under pressure, are unlikely to remain insulated. Even metals, which recently outperformed, show signs of peaking.
Geopolitical events may still generate sharp price spikes. But unless they materially remove supply for sustained periods, they are unlikely to override the larger forces already pushing energy markets lower.