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Oil heads for its first weekly gain in three on a 5.3% surge, but the geopolitical risk premium now sits alongside a fundamentally oversupplied market and a Supreme Court ruling that just dismantled Washington’s trade architecture.
Price Action and Positioning
Brent crude futures settled at $71.30 on February 20, easing 33 cents on the session but holding near their highest level since late July after a 2% surge the previous day. West Texas Intermediate closed at $66.48. Both benchmarks locked in weekly gains of approximately 5.3% — the first positive week in three — with Brent trading in a $62.69–$72.33 range over the past month and the rally now exceeding 20% from December lows. Giovanni Staunovo, oil analyst at UBS, noted limited appetite for profit-taking ahead of the weekend. Ole Hansen, head of commodity strategy at Saxo Bank, described a market in paralysis, waiting for a binary outcome. Saxo Bank’s flow data showed a sharp increase in Brent crude call option purchases, signaling that professional money is hedging for disruption rather than fading the rally.
Trump’s Deadline Meets the IAEA Calendar
The catalyst is Trump’s ultimatum to Tehran, issued on February 19 aboard Air Force One: Iran has 10 to 15 days to agree to nuclear restrictions or face “really bad things.” The timeline aligns precisely with the International Atomic Energy Agency’s board meeting in Vienna starting March 2, where diplomats are expected to weigh a new censure resolution and a possible Security Council referral. Washington demands zero enrichment, ballistic missile dismantlement and an end to proxy support. Iran has rejected discussing anything beyond the nuclear file, calling missile constraints a red line. Foreign Minister Abbas Araghchi said negotiators agreed on “guiding principles” during indirect Geneva talks, but the White House acknowledged the two sides remain far apart. Behind the diplomacy sits a physical buildup the market cannot ignore: the USS Abraham Lincoln carrier strike group is in the Arabian Sea, the USS Gerald Ford is en route, and a senior US official said full strike capability will be in place by mid-March. Iran’s Revolutionary Guard conducted Strait of Hormuz exercises this week, while a Russian corvette joined Iranian drills in the Gulf of Oman — a pointed signal of Moscow’s alignment. Poland urged its citizens to leave Iran immediately. Daniela Hathorn, senior market analyst at Capital.com, noted that even limited disruption to the Strait, which carries roughly 20% of global oil supply, could trigger an immediate supply shock.
A Bullish EIA Print Underneath the Headlines
The week’s most bullish data point came from the Energy Information Administration. US crude inventories plunged by 9 million barrels for the week ending February 13, against expectations of a 2.1-million-barrel build. Gasoline stocks dropped 3.2 million barrels, distillate inventories fell 4.6 million barrels, and refinery utilization climbed to 91%. Total product supplied rose 540,000 barrels per day to 21.65 million bpd, with distillate demand hitting its highest level since January 2022. The physical market is tighter than headline surplus narratives suggest.
The Structural Overhang
Longer-duration positioning must contend with fundamentals pulling in the opposite direction. JP Morgan analysts Natasha Kaneva and Lyuba Savinova warned that the oil surplus from the second half of 2025 persisted into January, projecting sizeable surpluses later this year and estimating that output cuts of 2 million barrels per day would be needed to prevent excess inventory builds in 2027. OPEC+ is meanwhile discussing resuming output increases from April. The Group of Eight producers kept quotas unchanged through March but offered no forward guidance beyond that — a conspicuous silence flagged as significant by Jorge León, former OPEC official at Rystad Energy. The next ministerial meeting falls on March 1, almost exactly coinciding with both the IAEA board session and the outer edge of Trump’s deadline.
SCOTUS Adds a New Variable
On the same day Trump’s clock started ticking, the Supreme Court struck down the bulk of the administration’s tariff regime in a 6–3 ruling, finding that IEEPA does not authorize the president to impose tariffs. The decision invalidated “Liberation Day” reciprocal duties and fentanyl-related levies, covering more than $130 billion in collected revenue. Trump immediately announced a replacement 10% global tariff under Section 122 of the Trade Act, later raised to 15%. For oil markets, the ruling removes a layer of cost pressure from global supply chains but raises questions about the administration’s capacity to enforce the sanctions regime against Iranian crude that underpins the current risk premium. Section 232 tariffs on steel, aluminum and industrial metals remain intact — not all of Washington’s trade weapons were struck down — but the legal architecture behind maximum-pressure enforcement is now visibly fractured. The broader commodities complex is already under strain: aluminum premiums have surged to records under tariff pressure, and an oil supply shock layered on top of existing metals stress would compound the inflationary impulse across European manufacturing. With the first days of March set to deliver OPEC+ output decisions, an IAEA censure vote and the expiry of Trump’s ultimatum almost simultaneously, the options market is speaking clearly: traders are paying for upside protection, positioning for a world in which Hansen’s binary outcome breaks toward disruption.
Sources: The Guardian, France24, Rte
