Oil prices showed little movement on Monday as traders awaited the second round of talks between the United States and Iran. Brent crude rose 0.1% to $67.60 per barrel, and WTI crude remained flat at $62.30 per barrel.
Both benchmarks posted weekly losses last week, with trading volumes limited due to market holidays in China and the United States. The WTI contract had no settlement price for the day.
Analysts at Saxo Bank noted that oil prices face limited upside potential. Without Middle East supply disruptions, a sustained move above $70 per barrel appears unlikely, with the market remaining focused on ample global supply levels.
A risk premium remains embedded in current oil prices, reflecting ongoing uncertainty regarding U.S.-Iran relations, especially following remarks made by President Trump suggesting that regime change would be the best outcome for Iran. Such comments have raised market concerns about potential escalation of tensions.
Conversely, ING analysts Warren Patterson and Ewa Manthey observed a different narrative unfolding with U.S.-brokered peace talks aimed at resolving the four-year conflict between Russia and Ukraine. These discussions could potentially de-escalate tensions, mitigating some of the risks perceived in the oil market.
OPEC+ Supply Plans Under Scrutiny
Media reports indicate that some OPEC members believe there is room to resume output increases in April, a potential shift that has garnered attention from market observers. OPEC+ is set to meet on March 1 to deliberate on their supply agreement.
ANZ Research analysts caution that the prospect of increased production from OPEC+ may weigh on prices, especially considering current supply conditions demonstrate ample availability in global markets.
If tensions in the Middle East ease, the existing risk premium could continue to decline, allowing bearish oil fundamentals to take precedence. Patterson and Manthey suggested that such a scenario could drive prices lower.
The ongoing balance between geopolitical risk and supply fundamentals continues to shape the market. Traders are closely monitoring diplomatic developments alongside OPEC+ production decisions, making the coming weeks pivotal in determining the directional trend of oil prices.
Presently, the market is in a consolidation phase as participants seek clarity on multiple fronts. The interaction of peace talks and potential supply increments creates significant uncertainty regarding the future trajectory of oil prices.
As OPEC+ members weigh demand conditions ahead of their meeting, April’s production strategy will become clearer, potentially laying the groundwork for oil market dynamics in the months to come.
