Commodities January 21, 2026

Oil Prices Retreat After Easing Geopolitical Tensions and Supply Concerns

Trump's de-escalation on Greenland and Iran reduces market risks, while supply dynamics and inventory data influence crude benchmarks

By Nina Shah
Oil Prices Retreat After Easing Geopolitical Tensions and Supply Concerns

Oil prices declined on Thursday, reversing gains from earlier sessions as easing geopolitical tensions and increased crude inventories affected market sentiment. U.S. President Donald Trump's decision to pull back on tariff threats towards European allies and his softened stance on potential military action in Iran reduced risk premiums. Supply interruptions in Kazakhstan prompted earlier price increases, but inventory reports and outlook revisions moderated the market response. The evolving situation around the Russia-Ukraine conflict also influences expectations for U.S. sanctions and oil supply stability.

Key Points

  • Oil prices reversed earlier gains due to easing geopolitical tensions involving Greenland and Iran.
  • Production disruptions in Kazakhstan initially supported prices but were offset by increased crude and gasoline inventories in the U.S.
  • Potential resolution of Russia-Ukraine conflict and related sanctions could further influence global oil supply and prices.

On Thursday, global oil prices experienced a downturn, undoing gains seen over the previous two days. The retreat followed U.S. President Donald Trump's recent reduction in aggressive rhetoric surrounding Greenland and Iran, coupled with ongoing evaluations of supply and demand conditions by investors.

At 1301 GMT, Brent crude futures fell by $1.25, or 1.92%, settling at $63.99 per barrel. Similarly, West Texas Intermediate (WTI) March contracts dropped $1.24, or 2.05%, reaching $59.38 per barrel.

Prior sessions had recorded a modest upward trajectory, with prices climbing slightly over 0.4% on Wednesday and previously rising 1.5%, driven partly by disruptions in Kazakhstan. Specifically, production at the Tengiz and Korolev oilfields halted due to problems in power distribution, supporting near-term price strength.

Ole Hansen, chief commodity analyst at Saxo Bank, noted that the market’s risk premium diminished following the de-escalation in Greenland and the lessened supply concerns related to Iran.

President Trump officially ruled out using force to acquire Greenland, stepping back from proposed tariffs against key European allies. Additionally, he expressed hope for no further military engagement in Iran while maintaining that the U.S. would act should Iran pursue nuclear weapons development.

Given this geopolitical recalibration, Tony Sycamore, an analyst from online brokerage IG, suggested oil prices are likely to stabilize in the vicinity of $60 a barrel.

Further contributing to market sentiment, Trump remarked on a possible imminent resolution to the Russia-Ukraine conflict and planned a meeting with Ukrainian President Volodymyr Zelenskiy. The cessation of hostilities could lead to the lifting of U.S. sanctions on Russia, potentially easing supply interruptions and exerting downward pressure on prices.

In its recent monthly oil market report, the International Energy Agency uplifted its global oil demand growth forecast for 2026, implying a smaller surplus for the current year. This adjustment may influence medium-term supply-demand balance assessments.

Meanwhile, U.S. crude and gasoline inventories increased last week, while distillate stocks experienced a slight decline, according to American Petroleum Institute data cited by market sources. Crude stockpiles reportedly grew by 3.04 million barrels in the week ending January 16, gasoline inventories swelled by 6.21 million barrels, and distillate supplies fell by 33,000 barrels.

Anticipating inventory changes, eight Reuters-polled analysts projected an average crude inventory rise of approximately 1.1 million barrels for the referenced week.

Yang An, an analyst at Haitong Futures, observed that the elevated crude stock levels represent a notable resistance to further price increases amid a market characterized by oversupply.

Risks

  • Supply interruptions due to geopolitical events remain uncertain, especially concerning Iran’s nuclear program and Russia-Ukraine conflict outcomes.
  • Oversupply conditions indicated by high crude inventories may limit price recovery potential.
  • Potential shifts in international sanctions and military actions could rapidly change demand and supply dynamics.

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