Oil prices firmed on Thursday, holding near levels not seen in seven months as traders parsed the potential for diplomacy to head off a U.S.-Iran military confrontation that could threaten supplies. At 0123 GMT, Brent futures were trading at $71.12 per barrel, up 27 cents, or 0.3%, while WTI futures stood at $65.65, a rise of 23 cents, or 0.4%.
Price movement earlier in the week showed volatility around those highs. Brent gained 8 cents on Wednesday, while WTI declined 21 cents. On Monday, both contracts climbed to their strongest points since July 31 and have largely remained close to those levels as Washington has moved military assets into the Middle East to press Iran to negotiate an end to its nuclear and ballistic missile programme.
Diplomatic efforts were in focus as U.S. envoy Steve Witkoff and Jared Kushner were scheduled to meet an Iranian delegation for a third round of talks in Geneva on Thursday. The outcome of these discussions is central to the market's view of near-term risk.
Market participants watched for signs negotiations could avert conflict. "Investors are focusing on whether military conflict will be averted in the U.S.-Iran negotiations," said Toshitaka Tazawa, an analyst at Fujitomi Securities. He added that if hostilities did occur but were limited in scope and short in duration, WTI would likely spike temporarily above $70 a barrel before easing back to the $60 to $65 range. By contrast, a protracted confrontation could interrupt crude flows from Iran, the third-largest crude producer in OPEC, as well as from other exporters across the Middle East.
The political rhetoric remained pointed. U.S. President Donald Trump briefly outlined his rationale for a potential strike on Iran during his State of the Union address on Tuesday, stating he would not allow a country he described as the world's biggest sponsor of terrorism to obtain a nuclear weapon. On the Iranian side, Foreign Minister Abbas Araqchi said on Tuesday that a deal with the U.S. was "within reach, but only if diplomacy is given priority".
In parallel with the diplomatic thread, supply-side preparations were evident. Two sources familiar with Saudi contingency planning said Riyadh is increasing its oil production and exports to help offset any potential disruption should a U.S. strike on Iran curtail flows from the Middle East.
OPEC+ dynamics also featured in price considerations. Three sources with knowledge of the group's thinking indicated OPEC+, which includes OPEC members and allied producers such as Russia, is likely to consider an output increase of 137,000 barrels per day for April as it prepares for peak summer demand and as prices have been influenced by the tensions between the U.S. and OPEC member Iran.
Offsetting some of the upside pressure on prices, U.S. crude inventories surprised the market with a large build. Data from the Energy Information Administration released on Wednesday showed U.S. crude stocks rose by 16 million barrels last week, the largest weekly increase in three years. That came well above the 1.5-million-barrel rise forecast by analysts surveyed in a Reuters poll and helped cap gains.
With diplomacy, military posturing, national oil company contingency measures and OPEC+ production deliberations all intersecting, markets remain attentive to moves on both the political and data fronts. Traders will likely continue to monitor the progress of talks in Geneva, statements from key policymakers, and weekly inventory updates for further direction.
Summary of current market posture:
- Brent near $71.12, WTI near $65.65 as of 0123 GMT, with both grades close to seven-month highs.
- Diplomatic talks scheduled in Geneva between U.S. envoys and an Iranian delegation are shaping short-term risk assessments.
- Large, unexpected U.S. crude stock build limited price upside despite supply-side contingency measures and OPEC+ output considerations.