Oil is pinned near seven-month highs as traders weigh US-Iran diplomacy against conflict risk and a potentially heavy US crude stock build.
Summary:
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Brent/WTI hover near seven-month highs
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US-Iran talks slated Thursday in Geneva
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Conflict risk sustains a risk premium
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Iran remains key OPEC producer
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API shows big crude build
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Gasoline/distillates reportedly declined
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EIA data due Wednesday
Oil prices hovered near seven-month highs on Wednesday as traders balanced the risk of a US-Iran military escalation against hopes that renewed diplomacy could ease supply fears. Brent and WTI were both up around 0.6% on the session, holding close to recent peaks set late last week for Brent and earlier this week for WTI.
The market’s resilience reflects an elevated geopolitical risk premium. The United States has been positioning military forces in the Middle East to pressure Iran into negotiations over its nuclear and ballistic missile programs, keeping investors alert to a disruption scenario. Iran is the third-largest crude producer in OPEC, and any broader conflict risked spillovers across a region that accounts for a large share of global oil supply.
Attention now turns to a third round of talks scheduled for Thursday in Geneva, where US envoys Steve Witkoff and Jared Kushner are expected to meet an Iranian delegation. Iranian Foreign Minister Abbas Araqchi signalled a deal could be achievable if diplomacy remains the priority, but uncertainty persists over whether Iran will meet the US “zero enrichment” red line.
Geopolitical nerves have also been sharpened by reports that Iran has accelerated discussions with China about acquiring anti-ship cruise missiles, which analysts say could enhance Iran’s ability to threaten US naval forces operating near its coastline.
Against that backdrop, fundamentals are sending a mixed signal. Market participants are wary that global supply may be running ahead of demand, and overnight US inventory data from the American Petroleum Institute showed a large crude build of 11.43 million barrels for the week ended Feb. 20, even as gasoline and distillate stocks fell. Official EIA data is due later Wednesday and could influence near-term price direction.
This article was written by Eamonn Sheridan at investinglive.com.