WTI, the US crude oil benchmark, traded near $93.25 in early Asian hours on Thursday, falling below $93.50. The move followed hopes of a deal linked to ending the war with Iran.
Bloomberg reported that the US and Iran are working on a preliminary framework for an agreement. US President Donald Trump said the US has had “very good talks” with Iran over the past 24 hours, and said there is no deadline for a reply from Tehran.
Strait Of Hormuz Supply Outlook
Expectations that the Strait of Hormuz could reopen also weighed on prices. The strait is a major global route for oil shipments, and reopening would support steadier supply flows.
US crude inventories continued to drop, based on the Energy Information Administration’s weekly report. Stockpiles fell by 2.314 million barrels for the week ending May 1, after a 6.233 million-barrel fall the prior week, versus a 2.8 million-barrel expected decline.
Goldman Sachs said global oil inventories are near their lowest level in the past eight years. The bank also noted a rapid draw in reserves alongside limited supplies.
With WTI crude currently trading near $102, the market is tense, balancing tight supplies against renewed rumors of diplomatic talks concerning maritime security in the Persian Gulf. This creates a challenging environment where fundamentals point one way while headline risk points another. Derivative traders should be positioned for sharp, sudden price swings in either direction over the next few weeks.
Options Strategy For Volatility
We remember a similar situation last year, looking back to early May 2025, when prices briefly fell below $93.50. That dip was caused entirely by the hope of a US-Iran deal, even as underlying inventory data showed a tightening market. The market’s memory of this event suggests any positive geopolitical news could trigger an aggressive, albeit potentially temporary, sell-off.
The fundamental case for higher prices remains strong, arguably more so than last year. The latest EIA data from May 5th, 2026, showed a surprise crude draw of 3.1 million barrels, and OPEC+ reports this quarter indicate global stockpiles are now 15% below the five-year average. This underlying tightness suggests any price drops driven by political rumors may be short-lived and represent buying opportunities.
Therefore, a key strategy is to use options to manage the expected volatility. Buying call options can capture the upside potential if fundamentals reassert themselves, while holding some puts can provide a hedge against a sudden peace-driven price collapse. We see the market punishing short-term speculators who ignore the critically low global inventory levels.
Adding to the bullish case is robust demand, particularly from Asia. Recent data from China’s National Bureau of Statistics showed factory output for April 2026 exceeded forecasts, signaling stronger than expected energy consumption. This demand floor makes a sustained price collapse less likely, even if geopolitical tensions ease.
