Crude Oil Fundamental Analysis: Inventories Surge Sharply, Yet Prices Remain Elevated Amid Geopolitical Risks

The latest Crude Oil Inventories report showed a sharp increase of +16.0 million barrels, far exceeding expectations of just +1.8 million barrels. This represents a significant build and, in theory, should exert downward pressure on oil prices as it reflects short-term supply surplus conditions.

However, the market reaction has been relatively muted. Crude prices have not recorded any meaningful corrective move, suggesting that the inventory data alone is not sufficient to alter the prevailing market sentiment. The primary reason is that geopolitical risks continue to dominate pricing dynamics, particularly the uncertainties surrounding U.S.–Iran relations.

At present, WTI is trading around USD 65.7 per barrel, while Brent remains near USD 70.74 per barrel, after edging slightly higher during the morning session. Part of the rebound is supported by the U.S. Dollar Index (DXY) pulling back toward the 97.3 level, easing pressure on USD-denominated commodities. At the same time, cautious sentiment amid ongoing macroeconomic uncertainties has limited aggressive selling activity.

The market’s focus is now firmly on the third round of negotiations between the United States and Iran in Geneva, expected to take place today or tomorrow. Although both sides have signaled diplomatic engagement, newly imposed U.S. sanctions and increased military presence in the region mean that the risk of escalation cannot yet be ruled out. This factor continues to sustain a geopolitical “risk premium” in oil prices, overshadowing the bearish implications of the inventory data.

In my view, in the short term, crude oil is likely to continue fluctuating within the current range rather than forming a strong downward trend. If the U.S.–Iran negotiations deliver clearly positive signals, a technical correction in oil prices could materialize. Conversely, signs of deadlock or escalating tensions may continue to support prices, keeping WTI above the USD 65 level and Brent above USD 70, despite mixed inventory signals.

At this stage, price structure suggests that the market is pricing geopolitical risks more heavily than pure supply–demand fundamentals. As a result, the short-term outlook leans toward consolidation with a price-supportive bias, rather than a deep bearish reversal.