Oil Reversals as Risk Premium Begins to Shrink
Oil prices fell for the first time in three days after Iran confirmed that negotiations with the United States would take place on Friday in Oman. This certainty about the diplomatic schedule immediately eased market concerns about the possibility of an imminent military strike against one of OPEC's major producers.
Brent weakened to near $68/barrel after previously gaining a total of 4.8% in two sessions. WTI also fell, moving below $64/barrel, indicating that some market participants were beginning to reduce risk-on positions that had been built up during heightened tensions.
However, the market has not completely calmed down. Differing views on the format and "parameters" of the talks make the chances of a quick agreement still uncertain. Moreover, the Middle East supplies about a third of the world's oil—so even a slight escalation could immediately lift prices through geopolitical risk premiums.
Investors' focus is also divided on other issues, including the Ukraine peace talks. Ukrainian President Volodymyr Zelenskiy said the process could be impacted by Russian attacks on energy infrastructure, and he requested additional support from the US to pressure Moscow to end the war.
In the broader commodity market, sentiment was also disrupted by the precious metals turmoil. Silver plunged more than 16%, erasing a two-day rally, while gold briefly fell as much as 3.5%. This wave of risk-off sentiment could increase volatility across assets, including energy.
From a fundamental perspective, EIA crude oil inventory data showed US stocks fell to their lowest level in a month, but the decline was smaller than previously expected. This limited the bullish impact of the inventory data.
Latest price update: Brent for April fell 2% to $68.05/barrel as of 12:01 p.m. Singapore time, while WTI for March fell 1.9% to $63.88/barrel. (asd)
Source: Newsmaker.id
