Analys
Hostile Trump may incite Iran to use China’s Yuan denominated oil contract

Donald Trump must certify the Iran nuclear deal every 90 days to ensure US sanctions are waived. He did not do so on 13 October 2017, and is unlikely to sign off between 12-17 January 2018 either. Potential consequent reactivation of sanctions may cause Iran to export oil using the Chinese Yuan denominated contract, which launches on 18 January. This may spark a move away from the present long-established USD denominated oil trading regime.
Crude oil has traded in USD ever since the greenback became the global reserve currency. As such, its status has been both a blessing – enabling the US to operate a trade deficit indefinitely – and curse – maintaining a too strong USD that destroyed domestic manufacturing jobs. Indeed, it has been suggested that the US invaded Iraq in 2003 because Saddam Hussein’s decision in October 2000 to start selling crude oil to Europe in euros rather than USD threatened the greenback’s petrodollar status.
Possible results of a failure to certify the Iran nuclear agreement brokered in 2015 are unclear. Only last week, the FT argued it would likely cause the whole deal to collapse, which might reactivate Iranian nuclear activity and precipitate further sanctions. Also, it would no longer be possible for the global community to monitor the country’s nuclear operations, reducing the flow of key information and undermining confidence in the region’s geopolitical stability.
Since banking, oil and shipping sanctions were lifted in 2015, Iranian oil production has increased by 1.1 mb/d to currently 3.8 mb/d. We think it unlikely the other six parties to the Iran nuclear deal (the UK, Russia, France, China, Germany and the EU) together with the UN will re-impose sanctions just because the US decides not to recertify the agreement. Therefore, a decision by Trump to re-impose sanctions unilaterally would likely mimic those imposed on 4 January targeting five Iranian entities and individuals, and others to be added.
Potentially the US could re-impose banking/USD sanctions on Iran, making it harder for the country to export its crude oil globally in a USD denominated market. However, such measures may encourage Iran to export crude oil in the future using the new Chinese Yuan denominated crude oil contract, which launches on 18 January, the day after the US announces whether it will recertify the current Iran nuclear deal. Since Trump has described the agreement as “the worst deal ever”, we think he is unlikely to do so.
The Yuan is well on its way to becoming a major global currency, given the continued growth in the Chinese economy and the country’s share of global trade, particularly oil trading. Today, China is the world’s largest crude oil importer. Moreover, in October 2016, the Yuan was included in the IMF’s Special Drawing Rights (SDR) basket. This year Yuan denominated crude oil trading begins, shattering the USD’s global petrodollar hegemony maintained since Bretton Woods in 1944. Indeed, the increased threat of renewed US banking/USD sanctions on Iran alone is likely to boost Iran’s interest in the new Yuan oil contract.
China will benefit considerably from such developments. Partly, it will be able to bypass the USD when buying nearly $200bn of oil needed each year. More important still, the Yuan will move much closer to being recognized as a central, key global currency. While the USD will not be replaced overnight as the world’s reserve currency nor as the one most commonly used for crude oil trading, it will be negative for the greenback, which will cease to be the crude oil market’s only, ruling currency. In short, its petrodollar status will be undermined. With $2.5trn in physical crude oil produced globally each year and, we estimate, $25trn in USD denominated turnover traded annually (using a 10x multiple), the impact on the US currency will likely be very substantial over time. In perspective Brent crude oil for delivery in 2024 today trades at $58/bl. A potentially significantly weaker dollar would mean a much higher Brent crude oil price in nominal terms making today’s longer term nominal prices a bargain.
Chart 1: Iran crude oil production – increased to 3.8 mb/d since sanctions lifted in 2015
Chart 2: Iran’s domestic use of crude oil and exports to China and non-China
Chart 3: China crude oil imports
Kind regards
Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking
Analys
Brent crude ticks higher on tension, but market structure stays soft

Brent crude has climbed roughly USD 1.5-2 per barrel since Friday, yet falling USD 0.3 per barrel this mornig and currently trading near USD 67.25/bbl after yesterday’s climb. While the rally reflects short-term geopolitical tension, price action has been choppy, and crude remains locked in a broader range – caught between supply-side pressure and spot resilience.

Prices have been supported by renewed Ukrainian drone strikes targeting Russian infrastructure. Over the weekend, falling debris triggered a fire at the 20mtpa Kirishi refinery, following last week’s attack on the key Primorsk terminal.
Argus estimates that these attacks have halted ish 300 kbl/d of Russian refining capacity in August and September. While the market impact is limited for now, the action signals Kyiv’s growing willingness to disrupt oil flows – supporting a soft geopolitical floor under prices.
The political environment is shifting: the EU is reportedly considering sanctions on Indian and Chinese firms facilitating Russian crude flows, while the U.S. has so far held back – despite Bessent warning that any action from Washington depends on broader European participation. Senator Graham has also publicly criticized NATO members like Slovakia and Hungary for continuing Russian oil imports.
It’s worth noting that China and India remain the two largest buyers of Russian barrels since the invasion of Ukraine. While New Delhi has been hit with 50% secondary tariffs, Beijing has been spared so far.
Still, the broader supply/demand balance leans bearish. Futures markets reflect this: Brent’s prompt spread (gauge of near-term tightness) has narrowed to the current USD 0.42/bl, down from USD 0.96/bl two months ago, pointing to weakening backwardation.
This aligns with expectations for a record surplus in 2026, largely driven by the faster-than-anticipated return of OPEC+ barrels to market. OPEC+ is gathering in Vienna this week to begin revising member production capacity estimates – setting the stage for new output baselines from 2027. The group aims to agree on how to define “maximum sustainable capacity,” with a proposal expected by year-end.
While the IEA pegs OPEC+ capacity at 47.9 million barrels per day, actual output in August was only 42.4 million barrels per day. Disagreements over data and quota fairness (especially from Iraq and Nigeria) have already delayed this process. Angola even quit the group last year after being assigned a lower target than expected. It also remains unclear whether Russia and Iraq can regain earlier output levels due to infrastructure constraints.
Also, macro remains another key driver this week. A 25bp Fed rate cut is widely expected tomorrow (Wednesday), and commodities in general could benefit a potential cut.
Summing up: Brent crude continues to drift sideways, finding near-term support from geopolitics and refining strength. But with surplus building and market structure softening, the upside may remain capped.
Analys
Volatile but going nowhere. Brent crude circles USD 66 as market weighs surplus vs risk

Brent crude is essentially flat on the week, but after a volatile ride. Prices started Monday near USD 65.5/bl, climbed steadily to a mid-week high of USD 67.8/bl on Wednesday evening, before falling sharply – losing about USD 2/bl during Thursday’s session.

Brent is currently trading around USD 65.8/bl, right back where it began. The volatility reflects the market’s ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins. Thursday’s slide snapped a three-day rally and came largely in response to a string of bearish signals, most notably from the IEA’s updated short-term outlook.
The IEA now projects record global oversupply in 2026, reinforcing concerns flagged earlier by the U.S. EIA, which already sees inventories building this quarter. The forecast comes just days after OPEC+ confirmed it will continue returning idle barrels to the market in October – albeit at a slower pace of +137,000 bl/d. While modest, the move underscores a steady push to reclaim market share and adds to supply-side pressure into year-end.
Thursday’s price drop also followed geopolitical incidences: Israeli airstrikes reportedly targeted Hamas leadership in Doha, while Russian drones crossed into Polish airspace – events that initially sent crude higher as traders covered short positions.
Yet, sentiment remains broadly cautious. Strong refining margins and low inventories at key pricing hubs like Europe continue to support the downside. Chinese stockpiling of discounted Russian barrels and tightness in refined product markets – especially diesel – are also lending support.
On the demand side, the IEA revised up its 2025 global demand growth forecast by 60,000 bl/d to 740,000 bl/d YoY, while leaving 2026 unchanged at 698,000 bl/d. Interestingly, the agency also signaled that its next long-term report could show global oil demand rising through 2050.
Meanwhile, OPEC offered a contrasting view in its latest Monthly Oil Market Report, maintaining expectations for a supply deficit both this year and next, even as its members raise output. The group kept its demand growth estimates for 2025 and 2026 unchanged at 1.29 million bl/d and 1.38 million bl/d, respectively.
We continue to watch whether the bearish supply outlook will outweigh geopolitical risk, and if Brent can continue to find support above USD 65/bl – a level increasingly seen as a soft floor for OPEC+ policy.
Analys
Waiting for the surplus while we worry about Israel and Qatar

Brent crude makes some gains as Israel’s attack on Hamas in Qatar rattles markets. Brent crude spiked to a high of USD 67.38/b yesterday as Israel made a strike on Hamas in Qatar. But it wasn’t able to hold on to that level and only closed up 0.6% in the end at USD 66.39/b. This morning it is starting on the up with a gain of 0.9% at USD 67/b. Still rattled by Israel’s attack on Hamas in Qatar yesterday. Brent is getting some help on the margin this morning with Asian equities higher and copper gaining half a percent. But the dark cloud of surplus ahead is nonetheless hanging over the market with Brent trading two dollar lower than last Tuesday.

Geopolitical risk premiums in oil rarely lasts long unless actual supply disruption kicks in. While Israel’s attack on Hamas in Qatar is shocking, the geopolitical risk lifting crude oil yesterday and this morning is unlikely to last very long as such geopolitical risk premiums usually do not last long unless real disruption kicks in.
US API data yesterday indicated a US crude and product stock build last week of 3.1 mb. The US API last evening released partial US oil inventory data indicating that US crude stocks rose 1.3 mb and middle distillates rose 1.5 mb while gasoline rose 0.3 mb. In total a bit more than 3 mb increase. US crude and product stocks usually rise around 1 mb per week this time of year. So US commercial crude and product stock rose 2 mb over the past week adjusted for the seasonal norm. Official and complete data are due today at 16:30.
A 2 mb/week seasonally adj. US stock build implies a 1 – 1.4 mb/d global surplus if it is persistent. Assume that if the global oil market is running a surplus then some 20% to 30% of that surplus ends up in US commercial inventories. A 2 mb seasonally adjusted inventory build equals 286 kb/d. Divide by 0.2 to 0.3 and we get an implied global surplus of 950 kb/d to 1430 kb/d. A 2 mb/week seasonally adjusted build in US oil inventories is close to noise unless it is a persistent pattern every week.
US IEA STEO oil report: Robust surplus ahead and Brent averaging USD 51/b in 2026. The US EIA yesterday released its monthly STEO oil report. It projected a large and persistent surplus ahead. It estimates a global surplus of 2.2 m/d from September to December this year. A 2.4 mb/d surplus in Q1-26 and an average surplus for 2026 of 1.6 mb/d resulting in an average Brent crude oil price of USD 51/b next year. And that includes an assumption where OPEC crude oil production only averages 27.8 mb/d in 2026 versus 27.0 mb/d in 2024 and 28.6 mb/d in August.
Brent will feel the bear-pressure once US/OECD stocks starts visible build. In the meanwhile the oil market sits waiting for this projected surplus to materialize in US and OECD inventories. Once they visibly starts to build on a consistent basis, then Brent crude will likely quickly lose altitude. And unless some unforeseen supply disruption kicks in, it is bound to happen.
US IEA STEO September report. In total not much different than it was in January

US IEA STEO September report. US crude oil production contracting in 2026, but NGLs still growing. Close to zero net liquids growth in total.

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