Global benchmark Brent crude futures declined 24 cents to settle at $68.80 per barrel during Tuesday's trading session, while U.S. West Texas Intermediate (WTI) fell 30 cents to $64.06. The modest pullback followed Monday's gains as market participants monitored escalating geopolitical friction between Washington and Tehran.
Strait of Hormuz Advisory Heightens Tensions
The U.S. Maritime Administration issued new guidance advising American-flagged commercial vessels to maintain distance from Iranian territorial waters while transiting the critical Strait of Hormuz. The advisory specifically instructed crews to refuse boarding attempts by Iranian forces, amplifying concerns about potential supply disruptions through the world's most important oil transit chokepoint.
"Unless traders see concrete evidence of actual supply disruptions, we may witness prices trending lower," noted Tamas Varga, an oil analyst at PVM. Despite current ample supply, the market continues to price in a geopolitical risk premium, with the CBOE crude oil volatility index recently reaching its highest level since June of last year.
Conflicting Supply Signals Emerge
Production data presented mixed signals. A Reuters survey indicated OPEC output decreased by 60,000 barrels per day in January, reaching 28.34 million barrels daily. Meanwhile, the OPEC+ alliance has suspended its regular monthly production increases for the first quarter, citing concerns about potential oversupply.
The International Energy Agency maintains its projection that global output will exceed demand by approximately 3.7 million barrels per day this year. However, the oil forward curve remains in deep backwardation, with near-term contracts trading at significant premiums to later months—typically indicating market anxiety about immediate supply availability.
Market Catalysts on the Horizon
Traders are now focusing on Wednesday's release of U.S. petroleum inventory data from the Energy Information Administration, which could provide the next directional catalyst. Additionally, the IEA will publish its February Oil Market Report on Thursday, offering updated assessments of global supply and demand fundamentals.
Broader economic indicators also remain in focus, with Friday's U.S. Consumer Price Index release potentially influencing the dollar's strength and, consequently, dollar-denominated commodity prices. The market's immediate attention, however, remains fixed on Gulf developments and whether incoming data justifies maintaining the current risk premium.
