WTI, the US crude oil benchmark, traded near $62.50 in early European trading on Friday. Prices came under pressure as oversupply worries continued.
In its monthly report on Thursday, the IEA said global oil demand growth this year is likely to be weaker than it previously expected. It also forecast that total supply will be higher than demand.
Us Inventory Data Adds Pressure
US inventory data added to the downside. The EIA said US crude stockpiles rose by 8.53 million barrels in the week ending 6 February. This followed a 3.455 million barrel drop the week before.
Geopolitical news offered some support. The Wall Street Journal reported on Wednesday that the US is considering seizing tankers carrying Iranian crude. It also said the US may send a second aircraft carrier strike group to the Middle East if nuclear talks with Iran fail.
Traders are watching US-Iran relations for clues on what comes next. This focus could keep price swings elevated.
In early 2025, WTI traded around $62.50 during a similar tug-of-war between weak supply and demand and rising geopolitical risk. That conflict is even stronger today. The market is still struggling to find a clear direction, and the same forces remain in focus for traders.
Persistent Oversupply Versus Geopolitical Risk
Oversupply concerns have stayed in place and continue to weigh on oil prices. The IEA’s January 2026 report kept the same message, forecasting that global supply will exceed demand growth for a third straight quarter. US crude inventories have also risen in four of the last six weeks. The latest EIA report showed a 4.2 million barrel build, which has added pressure.
At the same time, the Iran-related geopolitical risk premium remains strong and is helping limit further declines. The collapse of talks in Vienna last month has kept markets nervous. That raises the chance of shipping disruptions in the Middle East. This risk is a key reason why prices have not fallen more sharply, despite heavy supply.
In this setting, a volatility approach may make more sense than a simple bullish or bearish bet. Implied volatility on WTI options has risen to nearly 40%, up from an average of 32% in the last quarter of 2025. That suggests the market expects a large move. Strategies such as long straddles or strangles may work well because they aim to profit from a big price move in either direction.
For traders who are bearish because of the supply data, buying puts is a direct way to position for a drop. But geopolitics can move fast. One way to reduce cost is to fund those puts by selling out-of-the-money calls. This creates a risk-reversal or collar structure and helps protect against a sudden spike if Middle East tensions rise.
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