Oil Prices Continue Downward as US-Iran Nuclear Talks Approach

Bloomberg (Bloomberg) -- Oil prices have continued to decline, influenced by the upcoming negotiations between the US and Iran, which have alleviated immediate fears of military conflict and potential disruptions in supply. Brent crude is hovering around $67 per barrel after a 2.8% drop on Thursday, while West Texas Intermediate is trading below $63. The market reacted negatively following remarks by US President Donald Trump regarding Iran's willingness to negotiate but saw a partial recovery when Saudi Arabia unexpectedly reduced prices for Asian buyers, indicating confidence in the demand for its oil. Oil is on track to record its first weekly decrease since mid-December, diminishing some of the risk premium associated with elevated tensions in the Middle East, a region responsible for about a third of global crude production. However, differing views on the US-Iran talks raise questions about whether significant gaps can be bridged, suggesting that negotiations will likely continue to impact the market more than physical oversupply. “The oil markets are letting go of some of the geopolitical risk premium and reverting to fundamentals, which highlight sufficient supplies,” stated Samantha Hartke, head of market analysis for the Americas at Vortexa Ltd., an energy data analytics firm. “Should negotiations falter, we may see the risk premium return.” In related developments, during trilateral talks, Ukraine and Russia have agreed to exchange prisoners for the first time in five months as they work towards resolving their ongoing conflict. Progress is being reported, with outcomes anticipated “in the coming weeks,” according to Trump's special envoy. Meanwhile, BP Plc is seeking a partnership to increase production and share costs at the Kirkuk oil field in Iraq, known as one of the region’s longstanding oil sources, where extraction is generally more straightforward and cost-effective compared to other areas outside the Middle East.