Oil prices edged lower on Wednesday as rising geopolitical tensions between the United States and Europe weighed on market sentiment, offsetting a relatively constructive demand outlook from the International Energy Agency (IEA).

As of 06:00 ET (11:00 GMT), Brent crude futures for March delivery declined 0.4% to $64.63 per barrel, while West Texas Intermediate (WTI) crude slipped 0.5% to $60.09 per barrel. The pullback followed gains of around 1.5% in the previous session, which were supported by stronger-than-expected economic growth data from China.

Geopolitical Risks Drive Risk-Off Sentiment

Market sentiment turned cautious after renewed geopolitical uncertainty stemming from U.S. President Donald Trump’s push to annex Greenland, a semi-autonomous territory of Denmark. The move has raised concerns over the stability of U.S.–European Union relations and triggered a broader risk-off mood across global markets.

The U.S. administration has threatened to impose tariffs of 10%, potentially rising to 25%, on imports from eight European countries linked to the dispute. European officials have pushed back strongly, increasing fears of a wider trade confrontation that could dampen economic growth and, in turn, oil demand.

Investors are closely watching President Trump’s scheduled address at the World Economic Forum in Davos, where further clarity on trade and foreign policy could influence market direction.

IEA Raises 2026 Oil Demand Growth Forecast

Adding a more supportive element to the outlook, the International Energy Agency raised its forecast for global oil demand growth in its latest monthly oil market report. The IEA now expects demand to increase by 930,000 barrels per day (bpd) in 2026, up from 860,000 bpd projected in its previous report.

While the agency continues to anticipate that global oil supply will exceed demand this year, it noted that the surplus is likely to be narrower than previously expected, suggesting a more balanced market than earlier forecasts implied.

Focus Turns to U.S. Inventory Data

Attention is also turning to upcoming U.S. oil inventory data, which could provide further near-term direction for prices. The American Petroleum Institute (API) is set to release its weekly crude and gasoline stockpile figures later on Wednesday, followed by the Energy Information Administration (EIA) report on Thursday. Both releases have been delayed by one day due to the U.S. federal holiday earlier in the week.

This is general information only and not financial advice. For personal guidance, please talk to a licensed professional.

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