Oil prices fell by about 2% early on Thursday as the crucial U.S.-Iran talks began in Geneva in what analysts see as one last attempt to reach a nuclear deal through diplomacy.
As of 7:50 a.m. ET on Thursday, the U.S. benchmark, WTI Crude, traded down by 1.61% to below the $65 per barrel threshold, at $64.38.
The international benchmark, Brent Crude, was falling by 1.27% and was just below $70 per barrel, at $69.96.
Prices were under pressure after the latest weekly data by the U.S. Energy Information Administration (EIA) showed on Wednesday that crude oil inventories in the United States surged by 16 million barrels during the week ending February 20. Yet, recent weeks have been distorted by weather-related production freeze-offs and the subsequent snap-back in output, which can swing inventories sharply from one report to the next.
The market’s attention today is squarely fixed on Switzerland, which hosts the U.S.-Iran talks mediated by Oman.
Oman’s Foreign Minister Badr Albusaidi said negotiators had “demonstrated unprecedented openness to new and creative ideas and solutions.”
Still, it is uncertain whether any breakthrough could be made on Thursday.
The U.S. continues to amass forces in the Middle Eastern region, with the U.S. military saying it is prepared to execute orders given by U.S. President Donald Trump.
Commenting on the oil market implications, ING commodities strategists Warren Patterson and Ewa Manthey said early on Thursday that “A constructive resolution would likely prompt the market to gradually unwind as much as a $10/bbl risk premium, which we believe is currently priced in.”
The upside risk to oil remains should talks break down, “but the market may hold off on a full reaction until the scale of potential US action against Iran becomes clearer,” the strategists noted.
“If we are to see de-escalation between the US and Iran, it should allow weaker fundamentals to feed through to a lower flat price — particularly if OPEC+ resumes supply increases from April, which we believe they will agree to this weekend.”
By Charles Kennedy for Oilprice.com
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