Oil prices edged higher on Wednesday after falling about 2 per cent in the previous session as investors assessed progress in US-Iran talks but remained cautious about the prospects of a final deal that could ease supply concerns.
Brent crude oil futures rose 26 cents or 0.4 per cent to $67.68 a barrel by 0931 GMT, while US West Texas Intermediate (WTI) crude was up 24 cents or 0.4 per cent at $62.57, though both remained around two-week lows.
Iran and the US reached an understanding on Tuesday on main “guiding principles” in talks aimed at resolving their longstanding nuclear dispute, but that does not mean a deal is imminent, Iranian Foreign Minister Abbas Araqchi said.
Just as talks began on Tuesday, Iranian state media said Iran was temporarily shutting parts of the Strait of Hormuz, a vital global oil supply route, due to “security precautions” while its elite Revolutionary Guards conducted military drills there. Later, state media said the strait had been shut down for a few hours, without making it clear if it had fully reopened.
“Iran knows Trump’s negotiation tactics now. It also knows that a disruption in oil exports out of the Strait of Hormuz and a rally in the oil price to $150 per barrel is the very last thing Trump wants,” said SEB chief commodities analyst Bjarne Schieldrop in a note. “Iran has time to negotiate in calmness.”
Iran and Russia will conduct navy drills in the Sea of Oman and the northern Indian Ocean on Thursday, the Iranian semi-official Fars news agency reported, a few days after Revolutionary Guards conducted military drills in the Strait of Hormuz.
Political consultancy Eurasia Group said in a Tuesday note to clients that it thinks there is a 65 per cent probability of US military strikes against Iran by the end of April.
Investors will watch for weekly reports by the American Petroleum Institute, due later in the day, and the Energy Information Administration, the statistical arm of the US Department of Energy, on Thursday. Analysts polled by Reuters estimated that US crude oil stockpiles likely rose last week, while distillate and gasoline inventories probably fell.
Meanwhile, negotiators from Ukraine and Russia wrapped up the first day of US-brokered peace talks in Geneva on Tuesday, and President Donald Trump urged Kyiv to move swiftly toward an agreement to end the four-year conflict.
“Any shift in that geopolitical axis could add risk premium (to prices),” Sachdeva added.
