Oil prices advanced sharply on Wednesday, with Brent crude futures climbing close to $70 per barrel. The benchmark added 1.77% to settle at $70.02, while U.S. West Texas Intermediate crude rose 1.89% to $65.17. The rally occurred despite data showing a substantial weekly build in U.S. commercial crude inventories.
Geopolitical Risk Takes Center Stage
Market focus shifted decisively to heightened tensions between the United States and Iran. Concerns mounted over potential stricter enforcement against Iranian oil shipments and the possibility of U.S. military deployments in the Middle East. This injected a risk premium back into prices, with traders closely monitoring developments around the Strait of Hormuz, a critical chokepoint for global seaborne oil trade.
Supply Data Presents a Mixed Picture
The U.S. Energy Information Administration reported commercial crude stocks, excluding the Strategic Petroleum Reserve, increased by 8.5 million barrels for the week ending February 6, reaching 428.8 million barrels. While this build was larger than anticipated and indicated ample domestic supply, it was offset by a 2.7 million barrel draw in distillate inventories. Analysts noted the market retained a bullish bias due to geopolitical tail risks.
Attention now turns to key upcoming events. The International Energy Agency will release its monthly Oil Market Report on February 12, which is expected to influence supply-demand forecasts. Furthermore, the OPEC+ alliance, which groups OPEC with Russia and other partners, is scheduled to convene on March 1 to review production policy for April. In its latest monthly assessment, OPEC projected demand for its crude would decline by 400,000 barrels per day in the second quarter.
The market remains in a delicate balance, caught between robust physical inventories and simmering geopolitical uncertainties that could quickly disrupt supply flows.
