WTI fell for a second session and traded near $65.90 per barrel during European hours on Wednesday. The drop followed US inventory data that renewed worries about oversupply, ahead of an Energy Information Administration (EIA) report due later in the day.
The American Petroleum Institute (API) said US crude stocks rose by 11.4 million barrels in the week ended 20 February. That reversed the previous week’s 0.609 million-barrel decline.
Supply Risks And Nuclear Talks
Markets are also watching supply risks ahead of a third round of US–Iran nuclear talks. In his State of the Union address, President Donald Trump said he preferred diplomacy. He also accused Iran of rebuilding its nuclear programme and developing missiles that could reach the US.
Iran’s deputy foreign minister said Tehran would do “whatever it takes” to reach a deal with Washington. Traders are also monitoring the Strait of Hormuz, which carries about 20% of global oil flows. Any escalation there could disrupt supply.
Traders are also weighing demand risks tied to new US trade measures. Trump’s 10% global tariff took effect on Tuesday, and steps are under way to raise it to 15%.
A year ago, an 11.4 million-barrel jump in US crude inventories pushed prices below $66. That memory of oversupply is now clashing with a very different market. This suggests that simply betting on further declines could be risky.
Tariff worries in 2025 have broadened into fears of a wider economic slowdown. The International Energy Agency recently cut its 2026 demand growth forecast by 100,000 barrels per day, citing weakness in key Asian markets. The latest EIA report for the week ending February 20, 2026, also showed a modest crude build of 2.8 million barrels, reinforcing the message of softer consumption.
Tight Supply Versus Soft Demand
On the supply side, conditions look much tighter than a year ago. OPEC+ is holding to production cuts through the second quarter, and the US–Iran nuclear talks remain stalled. That keeps a geopolitical risk premium in the market. Any disruption in the Strait of Hormuz could quickly wipe out today’s supply cushion.
These mixed signals—soft demand but tight supply—point to higher volatility in the weeks ahead. This setup may be less suited to simple directional trades and more suited to strategies that benefit from sharp price swings. Options traders may consider straddles or strangles to take advantage of the uncertainty.
The CBOE Crude Oil Volatility Index (OVX) is near 38. That is elevated, but still below the extremes seen in early 2022, when it surged above 70. This suggests options prices are not yet fully reflecting the risk of a major supply shock, which could create an opportunity. In this view, buying volatility now could pay off if geopolitical events force a repricing.
With that in mind, buying out-of-the-money call options on WTI futures expiring in April or May may help protect against a sudden, supply-driven rally. At the same time, holding some puts could help limit downside if recession fears outweigh supply constraints and push prices back toward the low $70s. This balanced approach is designed for a market being pulled in two directions.
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