Week in Review — Oil Near Six-Month High as Geopolitical Risks and Tight Supplies Drive Sentiment

Crude prices climbed roughly 5% week over week, with Brent and WTI trading near six-month highs before easing slightly into Friday, thanks to both geopolitical headlines and active market developments. U.S. energy markets were closed on Monday in observance of Presidents' Day, concentrating this week's market movement into fewer days. The rally was largely driven by escalating rhetoric between Washington and Tehran, after President Trump warned Iran it had just 10-15 days to agree to curtail its nuclear program. Iran responded with joint naval exercises alongside Russia and temporary closures tied to military drills near the Strait of Hormuz.

Another development with implications for global crude flows came from diplomatic efforts between the United States and India. Washington is in "active negotiation" with India over potential sales of Venezuelan oil as part of broader talks to help New Delhi diversify away from Russian crude, a move tied to an interim U.S. trade deal that includes tariff reductions on Indian goods. U.S. officials hope to have more details soon, as the Department of Energy engages with India's Ministry of Energy on the arrangement, and several large Indian refiners have already placed orders for Venezuelan barrels.

From a supply and inventories perspective, the U.S. Energy Information Administration reported a sizable 9 million-barrel draw in crude stocks, alongside draws in both gasoline and distillates. U.S. crude inventories now sit about 5% below the five-year average, while distillate stocks are roughly 5% below seasonal norms. As a result, prompt ULSD climbed back above $2.60 per gallon, and backwardation steepened as supply tightened. Days of supply dropped from roughly 37 in mid-January to closer to 27 by mid-February, reflecting a jump in winter-driven demand and limited refinery downtime. The East Coast remains particularly strained, with recent draws extending diesel's backwardated structure.

More broadly, Venezuela's refining network boosted utilization to about 35% of capacity, up from much lower levels last year, processing roughly 450,000 bpd as state producer PDVSA works to stabilize domestic fuel availability while supplementing output with imported U.S. naphtha for gasoline blending and heavy crude processing.

On the demand side, U.S. fourth-quarter GDP growth slowed to 1.4%, signaling softer consumer and government spending. Despite steady overall economic expansion, hiring remains muted, and confidence surveys point to persistent consumer unease, ultimately a reminder that demand growth may struggle to keep pace with supply later this year.

With crude back above $65 and diesel inventories tightening, geopolitical risk premiums are firmly back in play. As tensions around Iran, Russia, and Venezuela evolve, volatility is likely to remain elevated, keeping focus on both near-term supply disruptions and the growing risk of oversupply later in the year.

Prices in Review

Crude opened the week at $63.30 on Tuesday before slipping to $62.30 on Wednesday, marking the weekly low. Prices increased sharply on Thursday, climbing to $65.10, and extended those gains into Friday, settling at $66.67. Overall, crude prices increased by $3.37 over the course of the week, representing a 5.32% gain.

Diesel opened the week at $2.3900 on Tuesday and held relatively steady on Wednesday at $2.3927. Prices accelerated higher on Thursday, climbing to $2.5106, before extending those gains into Friday and settling at $2.6152. Overall, diesel prices increased by $0.2252 over the course of the week, representing a 9.42% gain.

Gasoline opened the week at $1.9110 on Tuesday and held steady on Wednesday at $1.9114. Prices moved higher on Thursday, climbing to $1.9707, before extending those gains into Friday and settling at $2.0080. Overall, gasoline prices increased by $0.0970 over the course of the week, representing a 5.08% gain.