WTI crude oil futures climbed toward $67 per barrel on Friday, hovering near a seven-month high as extended US-Iran nuclear talks and heightened Middle East tensions kept geopolitical risk premiums firmly embedded in prices. The rally reflects a market increasingly sensitive to diplomatic ambiguity and potential supply disruptions, even as broader forecasts point to a supply surplus later this year.

Diplomatic Uncertainty Sustains Risk Premium

WTI rose to $67.15 per barrel on February 27, up 2.97% on the day. Talks between Washington and Tehran were extended into next week after mixed signals from Geneva negotiations. US officials reportedly expressed disappointment with progress, while Iranian and Omani representatives struck a more constructive tone.

Compounding tensions, the US authorized the departure of non-emergency staff and families from Mission Israel, signaling caution amid ongoing regional volatility. For energy markets, such developments reinforce fears of disruptions to critical transit routes, particularly in the Strait of Hormuz, through which a significant portion of global oil supply flows.

Since the start of the year, geopolitical risks have counterbalanced persistent expectations of oversupply. February gains of roughly 2.5% extend January’s sharp 13.6% rally, highlighting how political uncertainty continues to outweigh bearish supply narratives in the near term.

Supply Glut Concerns Remain in the Background

Despite the current upswing, structural concerns linger. Many analysts still anticipate a global surplus in 2026, driven by rising output from key producers and moderating demand growth.

On a year-over-year basis, crude prices remain 3.75% lower, underscoring that while near-term momentum is positive, the longer-term balance remains fragile. The market appears to be pricing in a geopolitical buffer rather than a fundamental tightening of inventories.

OPEC+ Meeting as Critical Catalyst

Investor attention now turns to the upcoming OPEC+ meeting on Sunday, where production policy for April will be determined. The alliance faces a delicate decision: maintain output discipline to stabilize prices or gradually raise production to defend market share.

Any indication of coordinated supply increases could temper the rally, particularly if diplomatic tensions ease. Conversely, a reaffirmation of restraint alongside continued geopolitical friction could push prices toward fresh multi-month highs.

Oil’s trajectory into March will hinge on the interplay between diplomacy, military posture in the region, and OPEC+ strategy. For now, markets remain skewed toward caution, with traders unwilling to unwind risk premiums amid unresolved negotiations.