Oil prices stayed firm because of a large risk premium. Markets are waiting for US-Iran talks and Russia-Ukraine talks, which are due to start in Geneva on Tuesday. ICE Brent edged higher on Friday after US CPI came in lower than expected, but it still ended the week lower. Uncertainty about US-Iran relations kept the risk premium in place after President Trump said regime change would be best for Iran. If the Geneva talks take a calmer, de-escalatory turn, the risk premium could fade. That would leave weaker supply-and-demand conditions to pull prices lower.

Geopolitical Risk Premium

Attention has also shifted to OPEC+ ahead of its 1 March meeting, where the group will decide April production levels. OPEC+ had paused supply increases in the first quarter because of seasonal demand patterns. Analysts’ balance sheet forecasts point to a large surplus in the second quarter. This suggests there is no need to add supply from April. Reports say some OPEC+ members believe the market can absorb extra output. If the group raises production, surplus expectations would grow even more. The article was produced using an Artificial Intelligence tool and reviewed by an editor. The current market looks similar to early 2025, when a large risk premium helped support oil prices. With Brent near $88 a barrel, that support looks fragile. It seems driven more by geopolitical headlines than by market fundamentals. If tensions ease, this price floor could disappear quickly.

Options Positioning

We remember following the US-Iran and Russia-Ukraine talks in Geneva in February 2025, which created a very similar setup. Once those meetings produced a more de-escalatory tone, the risk premium fell away fast. In the weeks that followed, Brent dropped by more than 12% as the market focused again on a growing supply surplus that had been overlooked. Today’s fundamentals also look bearish. U.S. crude inventories, reported by the EIA, have risen for five straight weeks to more than 449 million barrels. This is reinforced by talk that OPEC+ may ease production limits at its March meeting. The International Energy Agency’s latest report also expects a surplus to build through the second quarter of this year. This parallel suggests that any sign of easing geopolitical tensions could again trigger a sharp sell-off. Traders may want to consider buying put options on Brent or WTI futures with April or May 2026 expirations. This approach can benefit from a possible price drop, while keeping the maximum loss limited to the option premium. For a lower-cost alternative, a bear put spread may be more efficient. This means buying a put at a higher strike price and selling a put at a lower strike price with the same expiration. This reduces the upfront cost and can work well if oil prices fall moderately, rather than collapsing. Create your live VT Markets account and start trading now.

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