Oil slips from 7-year highs ahead of more U.S.-Iran talks

Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base

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Brent and WTI prices come off seven-year tops
U.S.-Iran talks set to resume on Tuesday
Market eyes potential return of Iranian oil, but price declines could be short-lived

BEIJING, Feb 8 (Reuters) – Oil prices eased on Tuesday ahead of the resumption of indirect talks between the United States and Iran which may revive a nuclear deal that could lead to the removal of sanctions on Iranian oil sales, increasing global supplies.

Brent crude was last down 40 cents, or 0.15%, at $92.55 a barrel by 0347 GMT, after hitting a seven-year high of $94 on Monday. U.S. West Texas Intermediate crude was down by 1 cent at $91.31 a barrel.

Both oil contracts have touched recent seven-year tops, supported by strong global demand, ongoing tensions in Eastern Europe and potential supply disruptions due to cold U.S. weather conditions.

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The talks on reviving the 2015 Iran nuclear deal, which are taking place in Vienna, will resume on Tuesday after a 10-day pause. The United States has restored some sanctions waivers, while Iran is demanding a full removal of sanctions and a U.S. guarantee of no further punitive steps. read more

“Crude oil futures eased lower as the spectre of Iranian oil hitting the market weighed on sentiment,” ANZ Research analysts said in a note on Tuesday, noting that negotiators had cited “progress” in reaching a deal that would “ultimately restore the nation’s sanctioned oil” to global markets.

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“Nevertheless, more bullish signals continue to emerge for oil,” they added, pointing to Saudi Arabia raising its oil prices and the unexpected shutdown of a U.S. refinery.

The ease in oil prices however could be temporary. While optimism over the U.S.-Iran talks spurred some profit taking, the price weakness will likely be short-lived as the oil market remains in a supply deficit, said OANDA analyst Edward Moya.

“With crude demand expected to steadily improve throughout the rest of the year, the oil market is completely being driven by both supply side and geopolitical risks,” he said.

Saudi Aramco said on Saturday it had raised prices for all crude grades it sells to Asia in March from February, in line with market expectations, reflecting firm demand in Asia and stronger margins for gasoil and jet fuel. read more

In the United States, refineries in Texas were knocked out of production on Friday by a citywide power outage, as freezing temperatures from an Arctic cold front swept the Gulf Coast, though some refineries are recovering or have since returned back to near normal operations.

U.S. crude oil and gasoline stockpiles also likely rose last week, while distillate inventories were seen falling, a preliminary Reuters poll showed on Monday. Crude inventories were seen increasing by about 700,000 barrels in the week to Feb. 4.