WTI fell for a second day, trading near $87.50 a barrel in Asian hours on Wednesday. Prices eased as supply worries reduced ahead of a possible second round of US–Iran talks before a two-week ceasefire ends.
The New York Post said President Donald Trump indicated talks could resume this week and opposed a 20-year pause in Iran’s nuclear enrichment. Vice President JD Vance said there was “significant progress” in the first round of talks in Pakistan, with follow-up discussions possibly within days.
The US is maintaining a naval blockade on Iranian oil exports through the Strait of Hormuz. Tehran is reported to be weighing a temporary stop to shipments through the route.
API data showed US crude oil stocks rose by 6.1 million barrels in the week ending 10 April. That followed a 3.72 million-barrel rise the prior week.
The IEA said global oil supply is forecast to drop by 1.5 million barrels per day this year. It said attacks on Middle East energy infrastructure and Iran’s effective closure of the Strait of Hormuz are disrupting output and exports, equal to about 1.5% of global demand, and reversing earlier expectations of supply growth.
We are seeing oil prices soften due to the prospect of peace talks between the United States and Iran. This easing of geopolitical tension is the main driver of the current downward trend, taking WTI to around $87.50. The market is pricing in a higher chance of a deal that could bring Iranian supply back online.
This situation creates significant uncertainty, pitting short-term diplomatic hopes against a harsh supply reality. The International Energy Agency’s forecast of a 1.5 million barrel per day global supply decline this year is a powerful bullish factor that cannot be ignored. This fundamental tightness suggests any diplomatic failure could cause prices to snap back violently.
Given the immediate downward pressure, we should consider buying near-term put options. This strategy would profit from further price drops if the negotiations show positive signs before the ceasefire expires. A successful second round of talks could easily push prices toward the low $80s.
The reported 6.1 million barrel build in US crude stocks adds weight to the bearish case for now. This figure is substantially higher than the average weekly inventory changes we saw through most of 2025, indicating that US supply is currently outpacing demand. Such a large build gives the market a buffer and emboldens sellers.
However, we must hedge against the talks collapsing, as similar diplomatic efforts have failed in the past. Buying longer-dated call options, perhaps for the third quarter, would provide protection against a sharp price rally if the blockade on Iran continues. History shows us that geopolitical risk premium can return to the market almost instantly.
The conflicting signals are likely keeping oil volatility elevated, similar to levels seen during the onset of major conflicts in the early 2020s. This makes strategies that benefit from volatility decay, like selling out-of-the-money strangles or straddles, a risky but potentially rewarding play for those who believe a resolution is near. Traders must be prepared for sharp moves in either direction based on headlines from the negotiations.
