Oil Prices Plummet 2% as U.S. Stockpiles Soar, Trump’s Iran Strategy in Focus

On February 5, 2025, the oil market experienced a significant downturn. The surge in U.S. oil inventories overwhelmed any bullish sentiment from President Trump’s comments on reimposing stringent measures against Iran.

WTI crude, traded in the Nymex, closed down by 2.29% at US$71.03 per barrel, a fall of US$1.67. Meanwhile, Brent crude on the ICE fell by 2.08%, or US$1.59, concluding the day at US$74.61 per barrel.

An unexpected increase in U.S. oil stocks by 8.66 million barrels, bringing the total to 423.79 million barrels, was the main catalyst for the price drop. Analysts had only forecasted an increase of 1.3 million barrels, revealing a stark misjudgment in market expectations.

From a technical perspective, WTI broke below the key support level of US$72.00, encountering the next support at US$70.00. The Relative Strength Index (RSI) now indicates oversold conditions, suggesting a potential short-term bounce if demand recovers.

However, the moving averages are bearish, with the price trading below both the 50-day and 200-day moving averages, signaling a downtrend likely to persist without significant bullish catalysts.

For Brent, the scenario mirrors WTI with a breach below the 50-day moving average, pointing towards further declines if it fails to reclaim this level. The MACD (Moving Average Convergence Divergence) has shown a bearish crossover, further confirming the downward momentum.

U.S. Sanctions on Iran

Trump’s policy aims to tighten the noose on Iranian oil exports, yet Iranian leadership remains defiant. Foreign Minister Araghchi and President Pezeshkian have both downplayed the impact of U.S. sanctions.

Market analysts from ING suggest that even with reduced Iranian oil, global prices might not decrease as anticipated, due to other market forces at play. The backdrop of potential U.S.-China trade tensions adds another layer of complexity, with fears that global demand could weaken.

This scenario is echoed by comments from Bjarne Schieldrop at SEB, who sees the market as squeezed between trade war anxieties and the risk of supply disruptions from Iran.

In conclusion, the oil market’s reaction underscores the intricate dance between supply, geopolitical maneuvers, and economic forecasts. Traders will continue to navigate these waters, with eyes peeled for shifts in U.S. policy, Iranian responses, and any developments in U.S.-China relations that could sway demand.

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