Oil prices climbed to their highest levels of the month, driven by a combination of escalating Middle East tensions and robust U.S. economic data that bolstered demand prospects. West Texas Intermediate (WTI) crude traded at $64.85 a barrel, up 0.3%, while Brent crude rose 0.2% to $69.57. The gains came despite a significant 8.5 million barrel increase in U.S. crude inventories reported by the Energy Information Administration, which far exceeded analyst expectations.
The price surge was primarily fueled by investor concerns over potential supply disruptions. Tensions between the U.S. and Iran escalated, with President Donald Trump stating that no "definitive" agreement was reached with Israeli Prime Minister Benjamin Netanyahu on a path forward regarding Iran. Trump had earlier indicated he was considering deploying a second aircraft carrier to the Middle East if a deal was not secured. Market anxiety focused on the risk of disruptions to flows through the Strait of Hormuz, a critical chokepoint for roughly one-fifth of global oil consumption.
Concurrently, positive U.S. labor market data provided underlying support for energy demand. The Labor Department reported an unexpected acceleration in job growth for January, with non-farm payrolls increasing by 130,000 jobs and the unemployment rate dropping to 4.3%. Claudio Galimberti, chief economist at Rystad Energy, noted this resilient labor market underpins demand for transport fuels and reduces downside risks to U.S. consumption, creating a "moderately supportive" backdrop for energy markets.
However, technical analysis suggests the rally may be vulnerable. Analysts pointed to a bearish engulfing formation on the WTI chart, indicating fading upward momentum and a potential "bull trap" following the push above the February 4 high. IG analyst Tony Sycamore noted that a sustained price break above the $65–$66 level would require further escalation in the Middle East, while any de-escalation could rapidly lead to profit-taking, pushing prices back toward the $60-$61 range.
