Oil Prices Ease as Markets Watch US-Iran Diplomatic Signals

Oil prices edged lower on Thursday as investors monitored renewed diplomatic efforts in the Middle East that could prevent a resumption of US military strikes against Iran. The developments have eased some of the geopolitical risk premium that had previously supported higher oil prices.

Diplomatic efforts gained attention after US Vice President JD Vance reportedly reached out to Mohsen Rezaee, secretary of Iran’s top security body. Meanwhile, Iranian Foreign Minister Abbas Araghchi said Tehran was still giving diplomacy a chance to resolve the conflict.

Negotiations between the US and Iran have been ongoing for several months but have repeatedly stalled. US President Donald Trump acknowledged that Vance had sent a letter to Iranian officials and said talks were currently taking place through mediators. However, Trump said he was uncertain whether the negotiations would ultimately produce an agreement.

The diplomatic developments have encouraged some investors to take profits following a strong rally in oil prices. Brent crude has gained more than 10% this month and recently reached its highest level since April. The surge has increased pressure on consumers while making it more difficult for central banks to contain inflation.

Supply concerns remain a key factor in the oil products market. The conflict in the Middle East and increased Ukrainian attacks on Russian refineries have disrupted supplies, particularly diesel. However, additional fuel export quotas issued by China have provided some relief and put pressure on European oil product prices.

Meanwhile, Europe plans to release around 42 million barrels of oil reserves over the next three months as part of efforts to ease pressure on energy prices. Around half of the reserves consist of diesel, which could help increase available supplies in the market.

The direction of oil prices will now depend heavily on developments in US-Iran diplomacy. If negotiations progress toward a concrete agreement, the geopolitical risk premium could decline further and put additional pressure on oil prices. However, as long as conflict risks and threats to energy supply routes remain, the downside for crude prices could remain limited.(mrv)

Source : Newsmaker.id