Oil prices remained close to seven-month highs on Wednesday, driven by concerns over the potential for military conflict between the U.S. and Iran, which could disrupt supply. This uncertainty persists despite upcoming talks between the involved parties scheduled for Thursday. Brent futures were priced at $71.22 per barrel, reflecting an increase of 45 cents, or 0.64%, as of 0140. WTI futures increased by 0.64%, equivalent to 42 cents, reaching a price of $66.05. Brent prices achieved their peak since July 31 on Friday, while WTI reached its highest point since August 4 on Monday. Both contracts have remained close to these levels as the United States has deployed military forces in the Middle East to urge Iran to negotiate a resolution to its nuclear and ballistic missile program.
An extended conflict has the potential to disrupt supplies from Iran, which ranks as the third-largest crude producer within the Organization of the Petroleum Exporting Countries, as well as from other nations in the strategically significant Middle East production area. U.S. envoys Steve Witkoff and Jared Kushner are scheduled to engage with an Iranian delegation for a third round of discussions on Thursday in Geneva. Iran’s Foreign Minister Abbas Araqchi stated on Tuesday that a deal with the U.S. is “within reach, but only if diplomacy is given priority”.President Trump has cautioned that the absence of a deal could lead to ‘very bad consequences’. “Whether Iran’s concessions will meet the U.S.’s ‘zero enrichment’ red line remains to be seen,” stated Tony Sycamore, in a recent note. In the context of escalating tensions, Iran and China have intensified discussions regarding the acquisition of Chinese anti-ship cruise missiles, as reported by Reuters sources. These missiles may be aimed at U.S. naval forces that have gathered near the Iranian coastline.
Experts indicate that anti-ship cruise missiles would bolster Iran’s strike capabilities and pose a threat to U.S. naval forces. Trump is set to present the customary State of the Union address to Congress on Tuesday evening. Two officials from the White House, who requested to remain unnamed, indicated that Trump is set to address his strategies regarding Iran, although specifics were not provided. Geopolitical tensions have indeed provided support for prices; however, the market faces challenges from significant inventory increases, as global supply surpasses demand.
Market sources indicate that the American Petroleum Institute reported a significant rise in U.S. oil stockpiles, amounting to 11.43 million barrels for the week ending February 20. Nonetheless, petrol and distillate inventories experienced a decline, according to sources referencing the API data. Later on Wednesday, the Energy Information Administration is set to release its official reports on U.S. oil inventories.