Oil prices spike after inventories drop; US-Iran talks ongoing

oil prices

Oil prices peaked up this Wednesday after the US crude inventories dropped by around 5 million barrels, versus market expectations of a slight increase. Such a behavior sparked further concern over tight supplies to the global market.

Firstly, US crude stocks fell by 4.8 billion last week; the expectative was for a build of about 369,000 barrels. However, stocks also fell at the Cushing hub delivery hub for US futures by 2.8 million barrels, and gasoline and distillate inventories were also lower.

As a result, Brent crude futures gained $1.06, or 1.2%, to $91.84 a barrel by 10 AM this Wednesday; at the same time, US West Texas Intermediate crude rose 91 cents, or 1%, to $90.27 a barrel. Crude benchmarks had slid about 2% on Tuesday as Washington resumed indirect talks with Iran to revive a nuclear deal.

Moreover, according to market watchers, an agreement between the US and Iran to revive the Nuclear Deal would have Iran supplying more oil to the market. Still, any resolution to the talks over reviving the 2015 nuclear deal remains far off.

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Oil prices could reach “tripe figure territory”

Craig Erlam, the senior market analyst at OANDA, said about the matter. “If U.S.-Iran talks continue to progress, this level should come under some pressure, while a collapse of negotiations could be the catalyst that drives the price towards the triple-figure territory.”

On the other hand, the market also took a hit to its bullish sentiment after the latest monthly report from the Energy Information Administration, which raised its outlook for US crude production to average 11.97 million barrels per day this year.

Furthermore, industry worries over political risks worldwide had ebbed a bit on Wednesday, several analysts said.

Finally, Commerzbank commodities analyst Carsten Fritsch, commented. “The concerns about a further escalation of the Russia-Ukraine conflict appear to have eased somewhat following the latest diplomatic efforts, which is reducing the risk premium on the oil price.”

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