Mixed Crude Trading Signals Despite Geopolitical Pressures and Shifting Crude Oil Inventory Data

WTI crude for February delivery climbed 0.35 per barrel (+0.57%) to reach a 2.5-month peak, while RBOB gasoline retreated 0.0066 per barrel (-0.36%) in today’s session. The divergent price action reflects competing market narratives: bullish geopolitical risk premiums offsetting bearish crude oil inventory data released by the Energy Information Administration.

Geopolitical Risk Premium Supporting Energy Markets

Escalating unrest in Iran has emerged as a primary driver of crude price strength. Mass street protests across Iranian cities, triggered by severe currency pressures and economic instability, have intensified as government security forces have responded with lethal force. The situation has attracted international attention, with US leadership signaling potential military intervention. Reuters reported today that American military personnel have received evacuation advisories from Al Udeid Air base in Qatar, the same facility Iran targeted with retaliatory strikes following US operations against Iranian nuclear infrastructure last year.

The supply implications are material: Iran produces over 3 million barrels per day. Should political turmoil escalate further or prompt military intervention, production flows from OPEC’s fourth-largest member could face significant disruption. This risk has become a critical price floor for crude.

Supply Chain Disruptions Across Multiple Regions

Beyond Iran, crude markets are digesting multiple supply-side challenges. Drone attacks targeting oil tankers near Russia’s Caspian Pipeline Consortium terminal have crippled loadings to approximately 900,000 bpd—nearly half the facility’s capacity. Vortexa data indicates global floating storage of crude (tankers stationary for 7+ days) slipped 0.3% week-over-week to 120.9 million barrels in the week ending January 9.

Ukraine’s sustained targeting of Russian infrastructure has amplified constraints. Over four months, drone and missile strikes have affected at least 28 Russian refineries, curtailing export capability. Since late November, at least six tankers in the Baltic Sea have been attacked. Combined with new US and EU sanctions on Russian oil entities and shipping infrastructure, these measures have meaningfully reduced global oil supply fluidity.

Crude Oil Inventory Data Reverses Price Gains

Today’s EIA weekly report delivered a bearish surprise, erasing much of crude’s intraday strength. The agency reported:

• Crude inventories unexpectedly rose 3.39 million barrels, contrary to forecasts for a 1.68 million barrel draw
• Gasoline supplies climbed 9.98 million barrels to near one-year highs, well above the expected 2.0 million barrel build
• Distillate stocks fell just 29,000 barrels, substantially less than the anticipated 662,000 barrel drawdown
• Cushing crude reserves increased 745,000 barrels

Seasonal positioning remains weak: US crude stocks sit 3.4% below the five-year average, while gasoline inventories exceed the seasonal norm by 3.4% and distillates trade 4.1% below average. The unexpectedly large builds shifted market sentiment from supply-constrained to demand-challenged.

Production Dynamics and OPEC+ Strategy

US crude production in the week ending January 9 declined 0.4% to 13.753 million bpd, remaining marginally below the record 13.862 million bpd hit in November. The Baker Hughes rig count fell three units to 409 in the latest week, hovering just above the 4.25-year low of 406 rigs seen in mid-December. The trajectory marks a sharp reversal from the 627-rig high recorded in December 2022—a 35% decline over 2.5 years.

OPEC+ signaled production discipline on January 3, committing to pause output increases throughout Q1 2026. While the cartel increased production by 137,000 bpd in December, supply growth will stall through March to manage an emerging global surplus. The group still has 1.2 million bpd of planned restoration cuts to implement. December OPEC production reached 29.03 million bpd, up 40,000 bpd month-over-month.

Demand Support from Chinese Crude Purchasing

China’s crude demand offers price support as inventories rebuild. Kpler data projects Chinese crude imports in December will jump 10% month-over-month to a record 12.2 million bpd. This aggressive purchasing pace provides fundamental demand ballast.

Longer-term outlooks remain cautious: the IEA projected a record 4.0 million bpd global surplus in 2026, with revised forecasts targeting 3.815 million bpd for next year, up from an already elevated 2.0 million bpd surplus anticipated for 2025. The EIA raised its 2026 US production estimate to 13.59 million bpd while trimming energy consumption forecasts to 95.37 quadrillion BTU.

Today’s session exemplifies crude’s internal conflict: genuine geopolitical and supply-chain constraints battle an emerging structural oversupply environment, with crude oil inventory data serving as the decisive short-term signal.