Price Performance Summary
| 01/26 Open | 02/06 Close | Price Change | |
|---|---|---|---|
| Brent Crude | 65.27 | 68.05 | +4.26% |
| WTI Crude | 61.22 | 63.55 | +3.81% |
| Dubai Crude | 61.58 | 67.18 | +9.1% |
During the first week, oil prices initially declined as the resumption of operations at Kazakhstan’s Black Sea terminal and the restart of production at the Tengiz oil field offset U.S. supply disruptions caused by winter storms. Mid-week, prices rebounded on escalating tensions around Iran, a weaker U.S. dollar, and an unexpected draw in U.S. crude inventories. Toward the end of the week, gains moderated as former President Trump stated that Iran was seeking a deal and the U.S. dollar rebounded after touching a four-year low, leaving oil prices hovering near six-month highs.
In the second week, oil prices fell sharply early on amid expectations of potential U.S.–Iran talks and intensified selling across the commodity complex. Mid-week, concerns over escalating tensions resurfaced following the downing of an Iranian drone in the Arabian Sea by the U.S. Navy, harassment of a U.S. oil tanker by Iranian armed boats in the Strait of Hormuz, and the lack of consensus on the nuclear negotiation agenda. At the same time, larger-than-expected declines in U.S. crude and distillate inventories provided support, while a U.S.–India trade agreement raised expectations of stronger global energy demand, pushing prices higher. Later in the week, Iran confirmed it would engage in nuclear talks with the U.S., but persistent disagreements and the failure to reduce the risk of military conflict—along with slow recovery at Kazakh oil fields potentially constraining exports—led oil prices to fall initially before rebounding.
Oil Market Data Update
Crude and Distillate Draws Beat Expectations, but Gasoline Continues to Build Amid Weak Demand
| 01/30/2026 | 01/23/2026 | 01/16/2026 | |
|---|---|---|---|
| Inventories (million barrels) | |||
| Commercial Crude (ex-SPR) | 420.30 (-3.5) | 423.75 (-2.3) | 426.05 |
| Strategic Petroleum Reserve (SPR) | 415.21 (+0.2) | 415.00 (+0.5) | 414.48 |
| Motor Gasoline | 257.90 (+0.7) | 257.21 (+0.2) | 256.99 |
| Distillate Fuel | 127.37 (-5.6) | 132.29 (+0.3) | 132.59 |
| Production Activity | |||
| Rig Count | 412 (+1) (02/06) | 411 | 410 |
| Refinery Utilization (%) | 90.50% (-0.4%) | 90.90% (-2.4%) | 93.30% |
Over the past two weeks, U.S. commercial crude inventories declined by a cumulative 5.8 million barrels, exceeding market expectations. This was primarily driven by production losses caused by winter storms, which pushed U.S. crude output to its lowest level since November 2024. Slower imports also contributed to inventory drawdowns, providing support to crude prices.
On the products side, gasoline inventories rose by a combined ~0.7 million barrels, reflecting seasonally weak end-user demand during the off-peak driving season and continued inventory accumulation. In contrast, distillate inventories—including diesel and heating oil—fell by a total of 5.3 million barrels. This decline was partly driven by increased heating and power generation demand due to winter storms, helping reverse prior inventory builds and alleviate distillate oversupply concerns.
On the supply side, the U.S. oil rig count increased by just one rig, indicating that producers remain cautious on capital expenditures and have not meaningfully revised their oil price expectations despite recent price gains. By contrast, the natural gas rig count rose sharply by five rigs week-on-week, suggesting that natural gas—particularly driven by LNG exports and winter demand—is currently more attractive than crude oil. Refinery utilization rates declined further to 90.50% as facilities entered seasonal maintenance.
Key News Commentary
Bleak Outlook for U.S.–Iran Talks as Iran Refuses Concessions and the U.S. Maintains Military Pressure
Oil price movements over the past two weeks have been heavily influenced by developments surrounding Iran. Former President Trump warned that the U.S. would take tougher action if Iran failed to reach a nuclear agreement, revealing that naval fleets and strike groups were being rapidly deployed to the Persian Gulf, sharply raising geopolitical risk. Subsequently, indications that the U.S. and Iran might engage in talks temporarily eased tensions.
Last week, however, the situation deteriorated following the downing of a drone deemed hostile in the Arabian Sea by U.S. forces, harassment of a U.S. oil tanker in the Strait of Hormuz by Iranian armed boats, and conflicting agendas in nuclear negotiations. These tangible confrontations raised fears that talks could collapse and supply disruptions could ensue. Although nuclear talks were ultimately held, Iran clearly stated that it would not accept a ban on uranium enrichment, emphasizing that enrichment is an inalienable sovereign right. Trump responded by stating that the U.S. would resume talks with Iran next week, while warning that military action remained an option if Iran failed to abandon uranium enrichment, halt its ballistic missile program, and cease support for regional armed groups.
Trump also signed an executive order threatening additional ad valorem tariffs on goods imported into the U.S. from countries that engage directly or indirectly in trade with Iran, and announced sanctions on 15 entities involved in Iranian crude oil, petroleum products, or petrochemical transactions. Markets remain concerned that negotiations have failed to reduce the risk of military conflict between the two countries. The uncertainty surrounding the talks has heightened risk aversion and driven oil prices sharply higher at times.
The most immediate concern is that a war involving Iran could disrupt supply from Iran, the third-largest oil producer in OPEC, with production of approximately 3.4 million barrels per day at risk. More critically, Iran controls the Strait of Hormuz, through which most Middle Eastern crude exports flow to major Asian markets. The Middle East accounts for roughly one-third of global oil supply, and about 20 million barrels per day—around one-fifth of global oil shipments—pass through the Strait daily. In the event of escalation, Iran could retaliate by blocking the Strait, posing a severe risk of global supply disruption. As a result, how markets price Iran-related geopolitical risk premiums and assess future U.S.–Iran diplomatic interactions will remain the primary driver of near-term oil price movements.
India Unlikely to Fully Sever Energy Ties with Russia in the Near Term
Former President Trump stated that an agreement had been reached with Indian Prime Minister Modi, under which India would stop purchasing Russian oil, prompting the U.S. to reduce tariffs on Indian goods from 50% to 18%. However, India has not explicitly confirmed that it will cease Russian energy imports. Indian refiners, after consulting the government, also received no clear guidance, suggesting that India is unlikely to abandon Russian oil entirely in the near term.
First, Russian oil reaches India faster and at lower shipping costs than crude from the U.S. or Venezuela. Second, U.S. crude is primarily light sweet oil, which may be less suitable for Indian refineries that are optimized to process heavy, high-sulfur grades. Although easing sanctions on Venezuelan crude could provide an alternative, Venezuela’s current output of only ~800,000 barrels per day remains insufficient to meet India’s needs. If India were to fully replace Russian supply, it would still need to seek other suitable suppliers, such as Canada.
Moreover, abandoning Russian imports would damage India’s long-term relationship with Moscow and disrupt its diplomatic balancing strategy. Most importantly, price remains the decisive factor. Deep discounts were the primary reason India initially turned to Russian crude, and these discounts appear to have widened further following the U.S.–India agreement, making Russian oil even more attractive to Indian refiners. In the short term, the main impact is likely to be wider discounts on Russian crude rather than a meaningful reduction in shadow-fleet flows into the global market.
Previously, refiners had expected Russian oil supplies to India to gradually decline to around 0.8–1.0 million barrels per day, roughly half of peak levels. While India may eventually reduce Russian imports to zero in exchange for relief from U.S. sanctions, there is currently no clear evidence that supply volumes will change materially before further details of U.S.–India agreements are disclosed.
Conclusion
Over the past two weeks, developments surrounding Iran have overwhelmingly dominated oil price movements. Concerns over potential disruptions to Iranian oil supply and the risk of a blockade of the Strait of Hormuz have driven markets to assign a significant geopolitical risk premium. Although the U.S. and Iran continue to engage in talks, deep disagreements and a lack of meaningful concessions on either side have failed to ease concerns over a potential military conflict. The second round of talks scheduled for this week will be a critical determinant of short-term oil price direction.
On the supply-demand front, winter storms temporarily boosted heating and power generation demand, helping distillates draw down inventories. However, as temperatures gradually rise, distillate demand is expected to weaken. Upcoming inventory reports will therefore be key to determining whether recent changes in product balances reflect a genuine shift in demand or merely weather-driven effects. In addition, the three major agencies are set to release their February oil market reports this week. Any revisions to supply-demand growth forecasts or price outlooks could refocus market attention on fundamentals and prompt a reassessment of the medium- to long-term balance in the global oil market.
