Oil Stabilizes After Losses As US-Iran Talks Ease Supply Fears, Inventories Rise

West Texas Intermediate (WTI) trades around $88.20 on Wednesday at the time of writing, up 0.40% on the day, attempting to stabilize after a recent pullback. The Oil market is caught between a relative easing in geopolitical tensions and persistent supply risks, keeping prices in a consolidation phase.

Recent reports indicate that the United States (US) has proposed a multi-point plan aimed at establishing a temporary truce with Iran, intending to pave the way for broader negotiations. This initiative fuels hopes of de-escalation in the Middle East, thereby reducing the geopolitical risk premium embedded in Crude Oil prices. However, Iranian authorities remain cautious and have signaled no concrete breakthrough, emphasizing that discussions are still indirect and fragile.

At the same time, Tehran has stated that “non-hostile” vessels may continue to transit through the Strait of Hormuz, provided they coordinate with its authorities. This communication helps partially reassure markets about the continuity of energy flows, although the situation on the ground remains unstable, with ongoing military activity involving several regional actors.

Meanwhile, Saudi Arabia has increased exports via its Red Sea port of Yanbu to bypass constraints linked to the Strait of Hormuz, an adjustment that contributes to easing fears of major global supply disruptions.

On the fundamental side, data from the US Energy Information Administration (EIA) showed an unexpected build in Crude Oil inventories of 6.926M barrels last week, whereas markets had anticipated a smaller change of 0.5M. This stock increase suggests potentially softer short-term demand and exerts a moderating pressure on prices.

Despite these bearish elements, some institutions such as TD Securities (TD) highlight that the market remains structurally tight. The bank points to a sharp reduction in flows through the Strait of Hormuz and a significant decline in floating storage capacity, arguing that benchmark prices could move sharply higher without a swift normalization of flows.

In this mixed environment, Oil remains highly sensitive to geopolitical developments and supply-demand signals, with investors closely monitoring any progress in Washington-Tehran discussions as well as weekly US inventory data.