Oil treads water as investors await outcome of US-Iran talks

Singapore — Oil prices edged down on Thursday, after rallying on an unexpected drop in US crude inventories in the previous session, as investors await the outcome of US-Iran nuclear talks that could add crude supplies quickly to global markets.

Brent crude futures slid 7 US cents, or 0.1%, to $91.48 a barrel at 4.25am GMT, while US West Texas Intermediate crude was at $89.62 a barrel, down 4 US cents.

Robust demand recovery from the coronavirus pandemic has kept global oil supplies snug, with inventories at key fuel hubs globally hovering at multiyear lows.

US crude inventories fell 4.8-million barrels in the week to February 4, dropping to 410.4-million barrels — their lowest for commercial inventories since October 2018, the Energy Information Administration (EIA) said. Analysts in a Reuters poll had forecast a 369,000-barrel rise.

US product supplied — the best proxy for demand — peaked at 21.9-million barrels per day (bpd) over the past four weeks due to strong economic activity nationwide, EIA data showed.

“We are seeing some consolidation after a fairly constructive EIA report,” said Warren Patterson, ING’s head of commodities research.

However, investors are closely watching the outcome of US-Iran nuclear talks, which resumed this week. A deal could lift US sanctions on Iranian oil and ease global supply tightness.

The White House publicly pressured Iran on Wednesday to revive the 2015 Iran nuclear agreement quickly, saying it will be impossible to return to the accord if a deal is not struck within weeks.

“The core uncertainty remains whether Iran is willing to sign on the dotted line,” Eurasia analyst Henry Rome said, adding that the consultancy was holding onto a 40% call on a return to the agreement.

The restoration of sanction waivers to Iran to allow international nuclear co-operation projects, which were announced last week, along with some positive comments from Russian diplomats, suggest that the parties are moving closer towards a deal, Patterson said.

“Any quick deal would likely put some further downward pressure on prices, as it would help alleviate some concerns over the lack of spare Opec capacity,” he added. Opec is a global oil cartel of some of the world’s largest producers.

Separately, US President Joe Biden and King Salman of Saudi Arabia discussed energy supplies and developments in the Middle East, including in Iran and Yemen, during a phone call on Wednesday.

Salman also spoke about maintaining balance and stability in the oil markets and emphasised the need to maintain the Opec+ supply agreement, state news agency SPA said. Opec+ comprises 24 oil-producing nations, led by Russia, in alliance with Opec. 

In Europe, US vice-president Kamala Harris will be meeting allies and partners in Munich next week seeking to deter Russian aggression in Ukraine.

Reuters