Oil prices have steadied ahead of nuclear talks between the United States and Iran. Brent crude traded around $US71 a barrel after a two-day decline, while West Texas Intermediate was near $US65. A US delegation, including special envoy Steve Witkoff, is scheduled to meet Iranian Foreign Minister Abbas Araghchi in Geneva. These discussions occur amidst heightened geopolitical concerns and a build-up of American forces in the Middle East.
Analysts suggest crude prices currently carry a risk premium due to the US-Iran tensions. The outcome of the upcoming talks is expected to significantly influence oil price direction. The market is caught between bearish expectations of a global glut and the potential for conflict in the Middle East, leading to elevated implied volatility and a bias toward bullish calls in the options market.
Despite the ongoing tensions, major Middle Eastern producers are increasing exports. Saudi Arabia is on track to export the most crude in almost three years this month, while Iran has been rapidly filling up tankers. Flows from Iraq, Kuwait, and the United Arab Emirates are also on the rise. These developments add further complexity to the supply outlook.
The market is closely watching the upcoming OPEC+ meeting scheduled for Sunday to determine supply policy for April. While some delegates anticipate a modest production increase, the overall outlook remains uncertain due to the potential for conflict between the US and Iran, which clouds the market. OPEC+ is an alliance of oil-producing countries, including the Organization of the Petroleum Exporting Countries (OPEC) and its allies, which meet regularly to decide on production quotas.
