Brent crude futures edged lower on Tuesday, retreating from the prior session's gains as traders weighed renewed geopolitical tensions in a key Middle Eastern shipping lane against broader market fundamentals. The international benchmark slipped 0.35% to $68.80 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.47% to $64.06.
Geopolitical Jitters Resurface in the Strait of Hormuz
The market's focus returned to the Strait of Hormuz after the U.S. Maritime Administration issued a new advisory to American-flagged commercial vessels. The guidance urged ships to maintain a significant distance from Iranian territorial waters while transiting the strait, a critical chokepoint for global oil flows. Vessels were instructed to verbally refuse any Iranian boarding requests but not to physically resist if boarded. This advisory, highlighting ongoing U.S.-Iran friction, initially sparked a supply risk premium in the previous session, sending Brent up 1.5% to close at $69.04 and WTI up 1.3% to $64.36.
The Strait of Hormuz, located between Oman and Iran, is a linchpin for global energy security, facilitating the transit of approximately 20% of the world's consumed oil. Major exporters from the Persian Gulf, including Saudi Arabia, the United Arab Emirates, and Iraq, rely heavily on this route to ship crude, primarily to refining hubs in Asia. Any significant disruption here would have immediate and severe consequences for physical supply chains.
Market Caution Amid Robust Supply Signals
Despite the geopolitical headlines, analysts noted that the underlying oil market appears well-supplied, tempering the price reaction. Tamas Varga of PVM Oil Associates described the market as "range-bound," suggesting that without concrete evidence of supply disruptions, prices could face downward pressure. This sentiment was echoed by other observers who pointed to ample inventories and steady production from several regions.
Supply data from the Organization of the Petroleum Exporting Countries (OPEC) indicated a modest decline of 60,000 barrels per day (bpd) in January, bringing total output to 28.34 million bpd, according to a Reuters survey. The reduction was largely attributed to unplanned outages in Nigeria and Libya. Furthermore, the broader OPEC+ alliance, which includes Russia, has paused its planned output increases for the first quarter of 2026, reflecting a cautious stance to avoid oversupplying the market.
Additional supply is returning from other areas. Production at the Chevron-led Tengiz field in Kazakhstan has recovered to about 60% of its normal capacity, or roughly 550,000 bpd, following shutdowns caused by fires at power facilities last month. Industry sources indicate the field is expected to return to full capacity by February 23.
Refiners Diversify and Sanctions Evolve
Meanwhile, global refiners are actively adjusting their crude sourcing strategies. In a notable shift, Indian state-run refiners Indian Oil Corp and Hindustan Petroleum Corp have purchased 2 million barrels of Venezuelan Merey crude from trading firm Trafigura for delivery in the second half of April. This move signals a continued effort by some buyers to diversify away from traditional suppliers and broaden their supply base.
On the sanctions front, the European Union is considering expanding its list of restricted ports that handle Russian oil. A proposal document reviewed by Reuters indicates the EU is looking to add Georgian and Indonesian ports to its sanctions list. If approved, this would prohibit EU companies and individuals from conducting business with these ports, potentially creating new logistical bottlenecks for Russian crude exports.
Key Data Releases on the Horizon
Traders are now turning their attention to a series of high-impact data releases scheduled for the remainder of the week. The immediate focus is the U.S. Energy Information Administration's (EIA) Weekly Petroleum Status Report, due Wednesday at 10:30 a.m. Eastern Time. This report will provide crucial insights into U.S. crude inventory levels, refinery utilization rates, and product demand.
Also on Wednesday, OPEC will publish its closely watched Monthly Oil Market Report, offering the cartel's updated projections for global supply, demand, and inventories for 2026. The week will culminate with the U.S. Consumer Price Index (CPI) report for January, released on Thursday, February 13, at 8:30 a.m. Eastern. As a key inflation gauge, the CPI data can significantly influence the U.S. dollar and interest rate expectations, thereby impacting commodity prices across the board.
In summary, while geopolitical risks emanating from the Strait of Hormuz provide a floor for oil prices, the market remains cautiously balanced. Traders are meticulously weighing the potential for supply disruptions against tangible evidence of ample physical barrels and evolving demand signals. The upcoming inventory and macroeconomic data will be pivotal in determining whether the current risk premium holds or if prices succumb to broader fundamental pressures.
