Energy Complex Not Immune to Broad Commodities Sell-Off

The energy complex was not immune to the broad sell-off in commodities over the past week, Standard Chartered Bank Energy Research Head Emily Ashford said in a report sent to Rigzone by the Standard Chartered team late Wednesday.

“The selection of Kevin Warsh as the next U.S. Federal Reserve chair, the notable ratcheting down of rhetoric between the U.S. and Iran, a business as usual OPEC+ meeting, and reduction in the U.S. tariff rates on India all acted against oil prices,” Ashford added.

In the report, Ashford highlighted that oil prices “fell from their peak of $71.89 per barrel on 29 January (a six-month high), back towards $66.00 per barrel on 2 February, settling just $0.38 per barrel higher than our machine learning model SCORPIO’s forecast”.

The Standard Chartered Bank analyst pointed out in the report that OPEC+ met virtually on February 1, adding that the meeting proceeded as Standard Chartered had expected.

“The November 2025 decision to pause production increments for Q1-2026 was upheld, with the communique suggesting this was due to seasonality,” Ashford said in the report.

“The commitment to market stability was reaffirmed, with the group retaining the optionality over returning barrels to the market, and flexibility to continue pausing or even reverse the adjustments,” Ashford added.

“The four countries with additional compensation cuts for past overproduction submitted updated schedules. Kazakhstan increased its cuts for January, up to 503,000 barrels per day, from a 279,000 barrel per day target set last month,” the analyst continued.

“February cuts have also been increased, to 629,000 barrels per day from 569,000 barrels per day. These adjustments are unsurprising, given the slew of issues affecting Kazakh production and exports over the last month. Iraq has also made small adjustments to its schedule, increasing its cuts by 20,000 barrels per day in January and 20,000 barrels per day in February,” Ashford went on to state.

The Standard Chartered Bank analyst highlighted in the report that the next meeting is scheduled for March 1 “when the group will decide whether to restart the incremental production increases or keep them paused”.

“An ongoing pause might suggest to the market that the group sees fundamentals as weak, despite the pause being blamed on typical Q1 seasonal softness,” Ashford said.

“Members will be looking for several key metrics to determine if the market can take these extra barrels. While spot price will be front and center for the media, adjustments in the forward curve will be more critical,” Ashford added.

“Over the past month the curve has strengthened notably, with backwardation pushing out to Q1-2027. One month ago it only applied to the front three contracts,” Ashford continued.

“If prompt prices remain steady in the low to mid $60s per barrel, market sentiment improves and the forward curve continues to strengthen, then we see no reason for OPEC+ to continue pausing its increases for the April loadings,” the analyst went on to state.

The Standard Chartered report projected that the ICE Brent nearby future crude oil price will average $62.00 per barrel in the first quarter, $63.00 per barrel in the second quarter, $64.00 per barrel in the third quarter, $64.50 per barrel in the fourth quarter, and $63.50 per barrel overall in 2026.

In a report sent to Rigzone by the Skandinaviska Enskilda Banken AB (SEB) team on Thursday, SEB Commodities Analyst Ole R. Hvalbye highlighted that Brent crude “peaked at $71.9 per barrel on January 29 as geopolitical risk premium surged, before that premium faded quickly and prices fell to $65.2 per barrel just three trading days later”.

Hvalbye added in the report that, “since then, geopolitics has crawled back in, lifting Brent again to around $68.4 per barrel” on Thursday morning.

“Zooming out, Brent is up roughly $7.8/bl (+~13 percent) since New Year, with about $3.2 per barrel added just this week alone,” he noted.

“Price action has been fast, choppy, and headline-driven, with the Middle East, and Iran in particular, as key,” he continued.

Hvalbye went on to state in the report that the Brent curve continues to tell a clear story.

“Pronounced front-end backwardation reflects near-term geopolitical fear, while the curve further out remains in contango,” he said.

“That structure signals a market still expecting surplus and stockbuilding unless OPEC+ actively intervenes. If the market truly believed the surplus had disappeared, the entire curve would have flattened. It has not,” he added.

To contact the author, email andreas.exarheas@rigzone.com