Oil prices fell on Thursday after U.S. crude inventories recorded their biggest increase in three years as traders assessed talks between the United States and Iran. Signs of weakness in the physical oil market are also weighing on prices.
Brent crude oil futures fell 95 cents, or 1.3%, to $69.90 a barrel by 1351 GMT. WTI futures fell $1.06, or 1.6%, to $64.36.
U.S. crude oil inventories rose by 16 million barrels last week, according to Energy Information Administration data on Wednesday.
UBS analyst Giovanni Staunovo said the weakness in the North Sea physical oil market was also weighing on oil prices, adding that the market would focus on the outcome of the third round of US-Iran talks on Thursday.
Mediator Oman has expressed hope for further progress after Iran and the US exchanged “positive and creative ideas” in talks on the nuclear conflict on Thursday, with a senior Iranian official saying the talks were “serious”.
The North Sea spot market has supported the Brent futures contract, which has risen about 15% so far this year as a potential military conflict between the United States and Iran outweighed expectations of a supply glut. On the supply side, Saudi Arabia is also ramping up oil production and exports as a contingency plan in case supplies from the Middle East are disrupted by a U.S. attack on Iran, two sources familiar with the plan said on Wednesday. OPEC+, made up of members of the Organization of the Petroleum Exporting Countries and allies including Russia, is likely to consider increasing oil production by 137,000 barrels a day in April, according to three sources familiar with the group’s thinking, as it prepares for a summer peak in demand amid firm prices.
Brent crude oil prices rose to their highest since July 31 on Monday as the US government deployed military forces to the Middle East to force Iran to negotiate a halt to its nuclear and ballistic missile programs.
If the conflict drags on, it could disrupt supplies from Iran, OPEC’s third-largest oil producer, and other Middle Eastern exporters.
“Given a constructive resolution, the market will likely gradually ease the risk premium of around $10/bbl,” ING analysts said in a note.
(Reporting by Enes Tunagur in London; Additional reporting by Shadia Nasralla and Yuka Obayashi in Tokyo and Emily Chow in Singapore; Editing by Emelia Sithole-Matarise and David Goodman)
