Oil markets found stability on Monday, with Brent crude futures gaining 0.3% to $68.22 per barrel and West Texas Intermediate (WTI) rising a similar percentage to $63.73. The modest advance came as diplomatic signals between Washington and Tehran helped calm concerns over potential supply disruptions in the Middle East.
Geopolitical Premium Adjusts
Analysts noted that while the immediate risk premium has faded somewhat, underlying tensions persist. "The Iranian risk premium cannot be fully defused as long as U.S. warships remain positioned in the region," commented SEB analyst Bjarne Schieldrop. The Strait of Hormuz, a critical chokepoint handling approximately one-fifth of global oil consumption, remains a focal point for market anxiety.
Market Structure and Inventory Dynamics
Despite recent price weakness that ended a six-week winning streak—with Brent falling over 3% and WTI declining more than 2% last week—the market structure remains in backwardation. This condition, where near-term barrels command higher prices than those for future delivery, typically signals tighter physical supply. Morgan Stanley estimates global crude stockpiles increased by 520 million barrels in 2025 and could grow by another 730 million this year.
Shipping costs have emerged as a significant factor, with tanker rates to Asia surging to over $3 per barrel in some cases. "Freight is a meaningful regional differentiator this year," observed Keshav Lohiya, CEO of HiLo Analytics.
Demand Signals and Supply Adjustments
Indian refiners demonstrated supply diversification by purchasing 2 million barrels of Venezuelan Merey crude for April delivery, according to trade sources. This shift comes as Asian buyers adjust to changing trade flows. Meanwhile, the International Energy Agency projects global oil output will exceed demand by 3.7 million barrels per day this year.
Key Reports Ahead
The market awaits several influential reports this week that could shift sentiment. OPEC will release its monthly oil market report on Wednesday, February 11, followed by the U.S. Energy Information Administration's Weekly Petroleum Status Report on the same day. The International Energy Agency will publish its latest Oil Market Report on Thursday, February 12.
