WTI rose by over 0.5% to about $64.50 in early European trade on Wednesday, supported by supply worries linked to rising US–Iran tensions. Reports said the US may consider intercepting ships carrying Iranian crude and could add a carrier strike group if nuclear talks fail.
Prices also drew support from India’s buying patterns, as refiners cut Russian crude imports while pursuing a trade deal with Washington. This has lifted purchases from the Middle East and West Africa.
Inventory Data Drives Near Term Focus
Downside risk followed an API report showing Weekly Crude Oil Stock rose by 13.4 million barrels for the week ending February 6, the largest increase since July 2025. That compared with Reuters’ survey estimate of about an 800,000-barrel rise, and markets are awaiting EIA inventory data due Wednesday.
Attention is also on OPEC’s monthly market outlook due later today and the IEA report due Thursday. The IEA has warned that supply is likely to exceed demand this year, which could lead to a surplus.
We are seeing oil prices hold steady around $64.50, but this stability is fragile. The market is caught between major supply risks from US-Iran tensions and clear signs of a supply glut. This conflict between geopolitical fear and physical oversupply will likely drive volatility in the coming weeks.
The threat of the US intercepting Iranian oil shipments is creating a significant risk premium in the market. We saw what happened back in 2024 when attacks on Red Sea shipping briefly sent prices soaring, and any direct conflict could trigger a much larger spike. Traders might consider buying call options to hedge against a sudden escalation, which could quickly push prices toward the $70 mark.
Volatility Strategies And Key Levels
On the other hand, we cannot ignore the massive 13.4 million-barrel inventory build reported by the API. This is the largest surplus we’ve seen since the demand slowdown in July 2025 and suggests fundamentals are very weak. This data, combined with the IEA’s warning that supply will outpace demand this year, points to underlying downward pressure on price.
Looking back to the demand shock of 2025, we remember consecutive weekly builds of over 10 million barrels preceded a sharp price drop below $50. Furthermore, U.S. crude production has remained robust, hitting a near-record 13.3 million barrels per day just last month, adding to the oversupply picture. If today’s official EIA data confirms the large build, the geopolitical fears may not be enough to hold prices up.
Given these conflicting signals, traders should prepare for sharp price swings rather than a clear trend. Strategies that profit from volatility, such as straddles, could be effective ahead of the OPEC and IEA reports later this week. Watch the EIA data very closely today, as a confirmation of the API’s number could break the current support level.
While India increasing its purchases from the Middle East is a supportive factor, it’s not enough to absorb the current glut. Recent data shows India’s overall crude imports in January 2026 were actually down about 4% from the previous month. This single shift in sourcing is unlikely to outweigh the broader picture of high global inventories.
