Crude Oil Advances Amid Escalating War-Threat In Middle East
WTI Crude Oil for March delivery was last seen trading up by $0.57 (or 0.89%) at $64.53 per barrel.
Recently, after ordering a massive naval fleet to move near Iran, U.S. President Donald Trump compelled Iran to negotiate with the U.S. over its nuclear programs.
The first round of talks held last week in Muscat, Oman, did not yield a breakthrough. No details on the next round of talks were shared.
With USS Abraham Lincoln close to Iran, Trump warned that he could send a second aircraft carrier to the region if the talks fail.
Israel’s Prime Minister Benjamin Netanyahu is in the U.S. reportedly to urge Trump to expand the negotiations to include curbs on Iran’s uranium enrichment plans as well as to discuss Iran’s support to Houthi Hezbollah militant groups.
In an interview with Channel 12 of Israel, Trump stressed that if negotiations do not pave way for an agreement, the U.S. will have to do “something very tough” on Iran.
In addition, reports indicate that the U.S. is planning to seize sanctioned tankers carrying Iranian oil.
Iran controls the Strait of Hormuz, which is a critical chokepoint for world’s oil transit.
Experts are concerned that any aggressive U.S. military action would be escalatory and increase the geopolitical risk premium to oil.
On the inventory front, data released by the American Petroleum Institute revealed that the U.S. crude oil inventories surged by 13.4 million barrels for the week ending February 6, reversing a 11.1-million-barrel draw in the prior week.
According to the U.S. Energy Information Administration, for the week ending February 6, crude oil inventories in the U.S. jumped by 8.5 million barrels to 428.8 million barrels, above expectations of a 0.8-million-barrel build. At the Cushing, Oklahoma delivery hub, inventories increased by 1.1 million barrels.
For the same period, gasoline inventories rose by rose by 1.2 million barrels, distillate inventories fell by 2.7 million barrels, and heating oil inventories rose by 202,000 barrels.
In its monthly oil market report for February, OPEC said it expects the world oil demand to drop by 400,000 barrels per day for the second quarter.
According to the report, the requirement for the second quarter will average 42.20 million barrels per day, down from 42.60 million bpd in the first quarter. However, OPEC has maintained its forecasts that world oil demand will rise by 1.34 million bpd in 2027 and by 1.38 million bpd for this year.
The OPEC+ alliance, which pumps almost half of the world’s oil, had paused production hikes for the first quarter of 2026 against the backdrop of wider predictions of a glut.
Recently, Saudi Arabia, OPEC’s top oil exporter, lowered the selling price of its premium grade crude oil to Asian buyers for the fourth consecutive month.
Traders are anticipating the updated forecast by the International Energy Agency due for Thursday.
In its latest prediction, the IEA had implied that global oil supply will exceed demand by nearly 3.69 million bpd.
Today’s stronger-than-expected U.S. jobs data has lowered the expectations of a near-term interest rate cut by the U.S. Federal Reserve.
In addition, economists are of the view that though the U.S. is not the primary driver of global oil demand, a resilient U.S. labor market could increase transport fuel demand and reduce downside risks to U.S. consumption.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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