West Texas Intermediate (WTI) has seen a five-day rise, reaching its highest level since October, now trading around $61.50 per barrel. This increase is influenced by geopolitical risks, particularly unrest in Iran, with prices up nearly 5% this week. Concerns about possible supply disruptions are growing as nationwide protests in Iran have revived fears of US involvement and wider regional instability. Former US President Donald Trump’s comments suggest a higher risk of military action, encouraging Iranian protestors to persist in their actions.

Investor Reactions and EIA Report

Investors are watching the situation between Iran and the US closely. A report from the Energy Information Administration (EIA) revealed an unexpected increase of 3.391 million barrels in crude inventories. Despite this, the market remains bullish, contradicting expectations for a 2.2 million-barrel decrease. The EIA predicts global oil prices will fall by 2026 as production grows faster than demand. Forecasts suggest Brent crude could average $56 per barrel in 2026 and $54 in 2027. WTI oil, produced in the USA and traded internationally, is influenced by supply and demand, geopolitical factors, and OPEC decisions. Weekly reports from the API and EIA can affect WTI prices by showing changes in supply and demand. Looking back to late 2025, unrest in Iran raised significant geopolitical risks in the oil markets, pushing WTI crude prices over $61 per barrel. This bullish trend even outweighed an unexpected increase in crude inventories reported by the EIA.

Current Market Dynamics and Futures

Although that specific risk premium has lessened, the market is tightening for other reasons. By mid-January 2026, WTI is trading much higher, around $81 per barrel, mainly due to OPEC+ making disciplined production cuts to control supply. Recent EIA data indicates a larger-than-expected inventory draw of 2.5 million barrels, contrary to predictions for a much smaller decline. In hindsight, the EIA’s long-term forecast from 2025, which estimated an average WTI price of about $56 for 2026, appears disconnected from today’s reality. That prediction was based on production outpacing demand but underestimated oil producers’ ability to manage supply. This shows how quickly forecasts can be outdated by coordinated actions from producers. For derivative traders, this means implied volatility may stay high in the coming weeks. The elevated prices are supported by fragile supply agreements, making the market sensitive to any news of compliance issues or changes in global demand. In this setting, options strategies like long straddles, which aim to profit from large price swings, make sense. We also notice significant backwardation in the futures market, where front-month contracts are priced much higher than those for later delivery. This reflects immediate supply concerns but also indicates that prices may soften in the latter half of 2026. This structure provides a positive roll yield for long holders but suggests that current high prices may not last indefinitely. Create your live VT Markets account and start trading now.

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