Oil Market Falls as US-Iran Plan Fresh Nuclear Talks

Oman’s Foreign Minister Badr Albusaidi said officials from Iran and the United States would hold another round of talks in Rome on Friday, despite the growing gap between the two countries over uranium enrichment.

Prices had gained earlier in the session after reports that US intelligence suggests Israel is preparing to strike Iranian nuclear facilities.

Iran is the third-largest producer among members of the Organisation of the Petroleum Exporting Countries (OPEC) and an Israeli attack could upset flows from the country.

The reports were attributed by CNN to US intelligence community members and government officials, one of whom told the media that the likelihood of such strikes “has gone up significantly in recent months.”

There are concerns Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz, through which Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates (UAE) export crude oil and fuel.

Market analysts noted that if tensions were to escalate, the oil markets could see temporary trade shifts or a supply hit of around 500,000 barrels a day, something OPEC and its allies, OPEC+ could offset fairly quickly.

The US and Iran have held several rounds of talks this year over Iran’s nuclear programme while US President Donald Trump has revived a campaign of stronger sanctions on Iranian crude exports.

The prospect of an end to the war in the Ukraine also applied downward pressure on oil prices.

Both developments would have bearish implications for oil prices, indeed. However, both of them are far from guaranteed in the immediate term.

Kazakhstan’s oil production, meanwhile, has risen by 2 per cent in May, defying OPEC+ pressure to reduce output.

Meanwhile, the US Energy Information Administration’s latest weekly inventory report, released yesterday, revealed builds across the board.

Crude oil inventories added 1.3 million barrels, the EIA said, and gasoline and middle distillates rose by 800,000 barrels and 600,000 barrels, respectively.

Despite the modest build in fuel inventories, the trajectory pressured oil benchmarks.

Now, investors are expecting  the summer driving season starting after Memorial Day weekend (last weekend of May) to draw down stocks, limiting further downside.