…Brent $71, WTI $64
Global oil prices hovered near seven-month highs on Wednesday as investors weighed the risk of military escalation in the Middle East against fresh signals of swelling U.S. crude inventories, with high-stakes talks between Washington and Tehran scheduled for today in Geneva.
Nigeria’s benchmark, Brent Crude, rose 33 cents, or 0.5 per cent, to $71.10 per barrel, while U.S. West Texas Intermediate (WTI) gained 22 cents, or 0.3 per cent, to $65.84. Brent last week touched its highest level since July 31, and WTI reached its strongest mark since August 4 earlier this week, with both contracts consolidating near those peaks.
Geopolitical Risk Premium Builds
Market sentiment remains dominated by mounting tensions between the United States and Iran. Washington has repositioned military assets in the Middle East, raising concerns that a breakdown in negotiations could trigger conflict and disrupt oil supply from Iran — the third-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC).
Analysts say the market is embedding a sizeable geopolitical “risk premium” into prices.
“This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments,” ING commodities strategists noted.
U.S. envoys Steve Witkoff and Jared Kushner are expected to meet an Iranian delegation for a third round of talks in Geneva. Iran’s Foreign Minister, Abbas Araqchi, signalled cautious optimism, saying a deal was “within reach” — provided diplomacy is prioritised.
However, U.S. President Donald Trump has warned that failure to reach an agreement could lead to “very bad consequences,” reinforcing market anxiety over potential supply shocks.
Further complicating the geopolitical landscape, reports indicate that Iran and China have accelerated discussions over potential purchases of Chinese anti-ship cruise missiles, a development that could heighten tensions with U.S. naval forces stationed near Iranian waters.
Supply Concerns Temper Rally
Despite the geopolitical tailwinds, bearish fundamentals are emerging. Market sources said the American Petroleum Institute (API) reported a sharp build in U.S. crude inventories — a massive 11.43 million-barrel increase in the week ended February 20 — underscoring concerns that global supply may be outpacing demand.
Traders now await official U.S. government stockpile data for confirmation, as sustained inventory growth could cap further gains in crude prices.
UK Refining Sector Under Pressure
Beyond the Middle East, structural concerns are also surfacing in Europe. The UK government has launched a call for evidence on the future of its downstream oil sector, as the country grapples with shrinking refining capacity.
The Fuels Industry UK, which represents companies supplying more than 85 per cent of Britain’s transport energy, warned that the country is increasingly vulnerable after the closure of two refineries over the past year, leaving just four operational sites — the lowest in modern history.
The Department for Energy Security and Net Zero said the review aims to produce a comprehensive downstream strategy by autumn 2026. Industry players argue that high carbon costs — estimated at up to £400 million ($540 million) annually — are undermining competitiveness against refiners in the Middle East, Asia and Africa.
Fuels Industry UK is pushing for the introduction of a Carbon Border Adjustment Mechanism (CBAM) by January 2028 to ensure imported fuels face equivalent carbon pricing.
“Without urgent policy action to create a level playing field, we risk exporting jobs and emissions and continuing to deindustrialise rather than decarbonise credibly,” said Elizabeth de Jong, CEO of the association.
Market Outlook
For now, oil markets remain finely balanced between diplomatic progress and the threat of military confrontation. While geopolitical risks are keeping prices elevated, mounting stockpiles and demand concerns could limit further upside unless tensions escalate sharply.
All eyes are now on the outcome of today’s Geneva talks — a potential inflection point for both crude prices and broader Middle East stability.