Oil prices are treading water this week, caught between diplomatic optimism and persistent geopolitical risk.
At the centre of the market’s attention is the latest round of indirect talks between the United States and Iran. Both sides described the negotiations as constructive, helping to cool immediate fears of an escalation that could disrupt supplies through the Strait of Hormuz - the narrow waterway that carries roughly one-fifth of global oil consumption. Any threat to this chokepoint typically sends crude prices sharply higher, as traders quickly price in potential supply disruptions. For now, that worst-case scenario appears less imminent.
Meanwhile the diplomatic track has taken centre stage in recent days. Israeli Prime Minister Benjamin Netanyahu said before departing for Washington that he would present Israel’s position on the negotiations to President Donald Trump.
Israel is expected to advocate for a tougher framework - one that would end Iranian uranium enrichment, limit ballistic missile development, and curb Tehran’s support for regional groups such as Hamas and Hezbollah.
In the meantime, President Trump has warned that the U.S. could deploy a second aircraft carrier to the region if talks fail. That signal alone is enough to keep a geopolitical risk premium embedded in oil prices, in other words, while tensions have cooled slightly, they haven’t disappeared.
Geopolitics wasn’t the only driver this week, prices wobbled after the American Petroleum Institute reported a surprisingly large 13.4-million-barrel build in U.S. crude inventories for the week ending February 6. The build more than erased the prior week’s 11.1-million-barrel draw, suggesting softer short-term fundamentals.
Large inventory builds tend to weigh on prices because they signal either weaker demand, stronger supply, or both. In this case, the data provided a counterbalance to the geopolitical support oil had been receiving.
For now, diplomacy is offering short-term relief, while fundamentals and political uncertainty continue to create crosscurrents. For traders, that means one thing: stay alert. In this environment, headlines can move prices as much as barrels.
Fuel card prices will drop in the region of 0.25 pence per litre for next week.
