West Texas Intermediate (WTI), the US crude oil benchmark, traded near $66.05 in early Asian hours on Wednesday. The price fell after a large rise in US crude stockpiles, with the Energy Information Administration (EIA) report due later on Wednesday.
The American Petroleum Institute (API) said US crude stockpiles rose by 11.4 million barrels in the week ending 20 February. This compared with a fall of 609,000 barrels the previous week, adding to supply concerns.
Geopolitical Tensions And Market Focus
US-Iran developments were also monitored ahead of nuclear talks on Thursday in Geneva. On Monday, the US embassy in Lebanon evacuated “dozens of its staff members” as a precaution.
US President Donald Trump said last week he was considering a limited military attack on Iran to raise pressure for a nuclear agreement. He said 10 to 15 days was “pretty much” the “maximum” time he would allow talks to continue.
The EIA report may affect pricing if it shows either a draw or a build in inventories. A larger-than-expected draw can point to stronger demand, while a bigger build can suggest weaker demand or extra supply.
With WTI currently trading near $82 a barrel, we are watching the market digest last week’s surprise inventory data. The Energy Information Administration reported a 3.5 million barrel increase for the week ending February 20th, putting some downward pressure on prices. This has many traders questioning near-term demand strength, especially with concerns over a slowing global economy.
Options Strategies For A Two Sided Market
We remember a similar conflict between fundamentals and geopolitics around this time in 2025. A massive 11.4 million barrel build was reported by the API, suggesting a major supply glut was forming. However, the market was simultaneously on edge due to heightened tensions between the US and Iran ahead of scheduled nuclear talks.
This creates a classic tug-of-war, making purely directional bets very risky for the next couple of weeks. Buying volatility through options strategies like straddles or strangles could be a prudent approach. This allows a position to profit from a large price move in either direction, whether it is driven by inventory reports or geopolitical headlines.
Historically, we have seen that unless geopolitical threats translate into actual supply disruptions, the weight of large inventory builds eventually presses prices lower. Following the inventory concerns of early 2025, the market saw prices soften once the immediate fears from Iran subsided. Therefore, puts purchased with expiry dates a few weeks out could offer a hedge against the bearish fundamental data reasserting itself.
