Crude Oil Surges As Threat Of War In Middle East Raises Output-Supply Concerns

(RTTNews) – Crude oil soared on Wednesday, with the U.S. serving an ultimatum to Iran to negotiate over its nuclear program and Iran rejecting any talks under threat even while a massive U.S. armada is nearing the Middle East.

WTI Crude Oil for March delivery was last seen trading up by $0.85 (or 1.36%) at $63.24 per barrel.

U.S. President Donald Trump announced that “a massive Armada” is heading towards Iran. Trump suggested that Iran should begin negotiations regarding its nuclear program and warned that if Iran fails to do so, a U.S. attack this time will be far worse than 2025 strikes.

Iran rejected any call for negotiations through threat and reiterated its earlier stance that it was fully ready for any confrontation with the U.S.

Iran also warned its neighbors not to allow the U.S. to use their “soil, sky, or waters.” Lebanon’s Hezbollah and Yemen’s Houthi militant groups have pledged support to Iran.

Further, Iran has also asserted “total control” over the land, air, and underwater areas of the Strait of Hormuz, a critical global shipping transit route for oil.

Iran produces more than 3 million barrels of crude oil per day.

Amid rising war threats, production-and-supply concerns have also increased, lifting oil prices.

Kazakhstan’s Energy Minister Yerian Akkenzhenov has announced that repair work has restored some transformers that caused an outage at the Tengiz production facility and that the oil field will be launched back in stages with the operation resuming in a week’s time.

Tengiz pumped nearly 360,000 bpd prior to the fire mishap.

Yesterday’s data from the American Petroleum Institute revealed that U.S. crude oil inventories fell by 0.25 million barrels for the week ending January 23, reversing a 3.04-million-barrel build in the prior week.

According to the U.S. Energy Information Administration, for the week ending January 23, crude oil inventories in the U.S. fell by 2.296 million barrels. At the Cushing, Oklahoma delivery hub, inventories decreased by 278,000 barrels.

For the same period, gasoline inventories rose by 0.224 million barrels, distillate inventories increased by 329,000 barrels, and heating oil inventories rose by 0.026 million barrels.

Further in the U.S. for the week ending January 25, due to the winter storm Fern, coal-fired electricity generation increased 31% from the previous week in the lower 48 states.

Fern crippled electricity across eastern two-thirds of the U.S. cutting oil supply by 2 million bpd (15% of total output).

Following three consecutive interest rate cuts to close out 2025, the U.S. Federal Reserve today announced its widely expected decision to leave rates unchanged (at 3.50% to 3.75%) after its first monetary policy meeting of 2026.

The Fed cited elevated uncertainty about the economic outlook as the reason for its decision.

The U.S. Dollar Index was last seen trading at 96.69, up by 0.48 0.50%. Dollar strength limited the upside in crude prices.

OPEC alliance is meeting on February 1 to decide on their output plans. Experts are of the view that the cartel would maintain the “pause” on their output increases for the first-quarter 2026 as they planned last year.

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