Oil prices remain relatively stable this week as concerns over potential Middle East supply disruptions eased, even as major geopolitical and trade developments continue to shape market expectations.
As of the latest session, Brent crude futures climbed modestly to about US$68.22/b, while West Texas Intermediate (WTI) traded near US$63.73/b, recovering from prior losses. The recovery followed an upswing in sentiment after the United States and Iran agreed to continue indirect talks, reducing immediate fears of an escalation that might threaten one of the world’s most critical oil chokepoints, the Strait of Hormuz, through which roughly one-fifth of global oil consumption passes. Reuters reported that both sides described recent negotiations as constructive, providing near-term relief from conflict-related price risks.
However, the geopolitical backdrop remains volatile. Iranian officials reiterated threats against US military assets in the region in the event of offensive action, indicating that the risk premium associated with oil markets cannot fully dissipate as long as US warships and regional tensions persist.
Trump, India, and Russia: A Potential Shake-Up in Crude Flows
One of the most consequential developments this week, according to broker Sparta Commodities, was what it described as a “bombshell” unilateral announcement by former US President Donald Trump of a proposed India–US trade deal. The framework reportedly includes a commitment by India to halt purchases of Russian crude, a move that, if fully enacted, would have bullish implications for the physical crude market.
India has been one of the world’s largest buyers of Russian seaborne crude since Moscow’s invasion of Ukraine prompted Western sanctions and deep discounts that made Russian barrels attractive to refiners in Asia. If Indian buyers shift away from Russian grades, the theory goes, Middle Eastern barrels would be needed to fill the gap, putting upward pressure on prices. Early market chatter suggests elevated buying on the Arab Gulf spot market tied to this narrative.
“Buy American” language was emphasized in the proposed deal, and market observers have interpreted this broad policy stance to include Venezuelan crude as eligible under certain terms. One Indian refiner confirmed purchasing a cargo of Venezuelan crude this week, the first of what could become a series of such trades, highlighting how shifting geopolitical alignments can quickly reroute physical flows.
The next question is whether China will soak up Russian barrels displaced by India, and initial indicators suggest that may be happening. However, traders are already discussing increasing Russian discounts and the potential for growing inventories of unsold cargoes at sea if demand patterns continue to change.
Iran, Freight Rates and Refined Product Flows
Beyond trade shifts, Iranian supply risk remains a variable that could trigger price spikes with little notice. Sparta pointed out that any collapse of negotiations could be an immediate bullish catalyst by threatening access to Iranian exports, supplies that would be taken out of an already tightening market.
Oil freight markets are also contributing to support for crude prices. Dirty tanker rates remain very bullish, reflecting a stretched legitimate tanker fleet. A key driver is the increasing participation of Venezuelan barrels in legitimate global trading, with more cargoes now heading long-haul to Asia rather than traditional short shipments to the United States, keeping vessels tied up for longer voyages and supporting freight costs.
In refined products markets, there has been talk of India–Europe diesel flows struggling due to new European origin rules that bar imports of products refined from Russian crude. That gap is currently being filled in part by the United States, where the Gulf Coast remains oversupplied with diesel. This dynamic links back to broader shifts triggered by renewed flows of Russian diesel into Latin America, following a reduction in Ukrainian refinery attacks; a return to more aggressive targeting of Russian refining infrastructure could quickly tighten diesel markets again.
Mexico’s Oil Hedge Strategy Adds Layers to Price Expectations
At the beginning of the year, the federal government secured oil revenues by contracting new petroleum hedges, according to statements by Edgar Amador Zamora, Minister of Finance, during President Claudia Sheinbaum’s press conference.
The operation was executed during the first weeks of January, following the long-standing practice that has made Mexico one of the few oil-producing countries to systematically insure its crude revenues. While neither the strike price nor the total volume covered were disclosed, Amador Zamora emphasized that confidentiality is essential due to the highly specialized and illiquid nature of the market. Revealing details, he said, would risk increasing costs and undermining the effectiveness of the hedge, ultimately harming public finances.
The objective of the hedge is to protect federal revenues against a decline in the average price of the Mexican crude export blend below the level assumed in the Federal Revenue Law. For 2026, the approved budget is based on an oil price of US$54.9/b, with projected oil revenues of MX$1.204 trillion (US$69.962 billion), representing a 1.9% increase compared to the previous year. In a market exposed to geopolitical shocks, shifting trade flows and sudden demand adjustments, the hedge provides a guaranteed floor for a portion of those revenues.
Mexico has relied on this mechanism since 2001, activating it during periods of acute stress such as the 2008 financial crisis and the 2020 pandemic-driven oil collapse. Historically, the program has cost the treasury close to US$1 billion annually, though costs vary depending on market conditions. Venezuela, Cuba and Mexico’s Strategic Export Choices
Adding to Mexico’s oil policy environment has been the political and strategic evolution in the region, particularly involving Venezuela and Cuba.
In early 2026, Mexico halted oil shipments to Cuba after dialogues with the United States and rising diplomatic tensions. Reuters reported that Mexico’s decision followed explicit US pressure and the strategic imperative to avoid conflict with Washington during ongoing negotiations over energy access and sanctions coordination. Cuban energy supplies, historically served by Venezuelan crude, were already strained after Venezuela’s oil output slowed and US sanctions tightened export routes.
Mexico had stepped in with aid crude deliveries to Havana, providing oil amid Cuba’s energy shortfalls. However, recent diplomatic shifts have paused this trade, leaving Cuban energy planners scrambling for alternatives and raising questions about the reliability of regional supply chains tied to geopolitical alignments.
What It Means for Prices
Taken together, these layers, stabilizing Iran-US tensions, potential Indian policy shifts away from Russian crude, elevated freight costs, refined product flow disruptions, and Mexico’s hedging and export realignments, are keeping oil markets balanced in a narrow range rather than trending decisively lower.
While immediate risk of a major supply disruption has eased with recent diplomatic progress in the Middle East, longer-term structural pressures, notably changes in Russian crude demand patterns and heightened geopolitical risk premiums, suggest that oil prices are more likely to find support than to collapse dramatically in the near term.
