Iran Nuclear Offer Impacts Oil
Sky News Arabia quoted Deputy Foreign Minister Saeed Khatibzadeh as saying Iran is ready to abandon its nuclear programme under that condition. Oil initially fell after the report but recovered and kept intraday gains. Higher energy prices have raised concerns about global inflation and could lead central banks to delay monetary easing. Expectations of tighter policy can weigh on oil prices. WTI stands for West Texas Intermediate, a US-sourced crude benchmark, distributed via the Cushing hub. It is described as “light” and “sweet” due to low gravity and sulphur content. WTI prices are driven mainly by supply and demand, including global growth, conflicts, sanctions and OPEC decisions. Oil is priced in US Dollars, so currency moves can affect affordability.Inventory Reports And Price Moves
US inventory data from the API and EIA can move prices as it signals shifts in supply and demand. Their results are similar 75% of the time and usually within 1% of each other. Looking back to early 2025, we saw WTI prices struggling around the $76 mark as the market balanced supply risks with fragile hopes of de-escalation in the Middle East. Today, with crude oil trading closer to $85 per barrel, it is evident that the geopolitical risk premium has become more embedded. The potential Iranian deal mentioned last year failed to materialize, leaving supply concerns as the dominant market force. The supply situation remains tight, a fact underscored by the latest OPEC+ meeting where members agreed to roll over production cuts into the next quarter. This decision comes as the most recent EIA report showed a surprise inventory draw of 1.9 million barrels, indicating that demand is outpacing current supply. These supply-side constraints suggest that any significant price dips are likely to be short-lived. On the demand side, concerns about central bank policy persist, just as they did last year. While the Federal Reserve initiated modest rate cuts in late 2025, the latest February 2026 inflation data came in slightly above expectations at 3.3%, tempering hopes for more aggressive easing. This creates a ceiling for prices, as traders worry that sustained high energy costs could slow economic growth. Given this dynamic, we should consider strategies that benefit from upward momentum while managing potential downside from macro headwinds. Buying call spreads on WTI futures, such as purchasing the April $88 call and selling the $92 call, offers a defined-risk way to position for further gains. This approach captures potential profits if prices continue to climb due to supply tightness but limits the loss if rate hike fears cap the rally. Volatility has increased, with the CBOE Crude Oil Volatility Index (OVX) ticking up to 35, higher than its average last year. This elevated volatility makes selling options more attractive, but also riskier given the geopolitical backdrop. Therefore, traders should be cautious about selling naked puts, instead favoring put credit spreads far out-of-the-money to collect premium while defining their maximum risk. Create your live VT Markets account and start trading now.
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