WTI crude traded near $65.65 in early European hours on Friday, up on the day but set for a weekly fall near $65.50. The move followed an extension of US-Iran nuclear talks, while OPEC+ is due to meet on Sunday to consider restarting output increases.
Talks between the US and Iran will continue next week after progress in Geneva, with negotiations resuming at a technical level in Vienna. Before that meeting, each side will consult with its government on the details of a possible agreement.
Geopolitical Risk And Supply Expectations
US President Donald Trump said the US could strike Iran if no deal is reached and set a 10–15 day deadline for an agreement. Markets are watching for any escalation, which could affect oil supply expectations.
In the US, crude inventories rose sharply. EIA data showed stockpiles increased by 15.989 million barrels in the week ending February 20, after a fall of 9.014 million barrels the week before.
Looking back to this time in 2025, we saw West Texas Intermediate crude trading near $65.50 per barrel. The market was weighed down by the potential for a US-Iran nuclear deal and a massive 16 million barrel build in US inventories. These factors created significant downward pressure on prices, making bearish positions attractive.
Today, the situation is markedly different as we see oil trading much higher, currently above $78 per barrel. The potential for new Iranian supply that concerned us last year has already been absorbed by the market, with Iran’s production now holding steady above 3.4 million barrels per day. This removes a key element of the downside risk that was present in early 2025.
Implications For Derivatives Positioning
Unlike last year when OPEC+ was considering output increases, the group is now maintaining its voluntary production cuts of 2.2 million barrels per day through the first quarter. This commitment to supply management provides a strong support level for prices. The market’s focus has shifted from a potential supply glut to managed scarcity.
Furthermore, US crude inventories are painting a tighter picture than the massive build we saw this week in 2025. The most recent Energy Information Administration report showed a draw of 5.1 million barrels, indicating stronger demand. This is a complete reversal from the bearish inventory data that influenced trading decisions a year ago.
Given these changed fundamentals, derivative traders should adjust their strategies from the bearish outlook of 2025. The factors that pointed towards a price drop to the mid-$60s have been replaced by dynamics supporting a higher price floor. Consequently, option strategies that anticipate continued price stability or further upside, rather than a significant decline, appear more appropriate in the coming weeks.
