BEIJING, Feb 12 - Oil prices inched up on Thursday morning as markets weighed renewed worries about escalating tensions between the U.S. and Iran against data showing a larger-than-expected build in U.S. crude inventories.
At 0126 GMT, Brent crude futures were trading 34 cents higher, or 0.49%, at $69.74 a barrel. U.S. West Texas Intermediate (WTI) crude rose 37 cents, or 0.57%, to $65.00. Both contracts had closed higher on Wednesday, with Brent futures gaining 0.87% and WTI rising by more than 1.05%.
Political commentary has kept market focus on the Middle East. U.S. President Donald Trump said after talks with Israeli Prime Minister Benjamin Netanyahu that they reached no "definitive" agreement on how to move forward with Iran, but that negotiations with Tehran would continue. Earlier, on Tuesday, President Trump said he was considering sending a second aircraft carrier to the Middle East if a deal is not reached with Iran, remarks made even as Washington and Tehran prepared to resume talks.
Diplomatic engagement has not been absent: U.S. and Iranian diplomats held indirect talks last week in Oman. The date and venue of the next round of U.S.-Iran talks have yet to be announced.
Market strategists highlighted a clear technical threshold in WTI. "A sustained break above a $65-$66 level would require further escalation in the Middle East, while any de-escalation could quickly trigger profit-taking back toward $60-$61 in WTI," said IG analyst Tony Sycamore.
Macroeconomic data added another dimension to price formation. The U.S. Labor Department reported that job growth unexpectedly accelerated in January and the unemployment rate fell to 4.3%, a sign of continued strength in the U.S. economy. "The resilient U.S. economy is also supporting oil demand expectations," said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
Offsetting some of the bullish signals was a hefty build in U.S. crude inventories. The Energy Information Administration reported U.S. crude inventories rose by 8.5 million barrels to 428.8 million barrels last week, a jump that far exceeded analysts' expectations in a Reuters poll for a 793,000-barrel rise. That inventory swing capped some of the upward pressure on prices.
Still, Gao noted an important nuance in the supply picture: since the start of the year, global oil inventory builds have generally come in below expectations and net long positions in overseas crude oil futures and options have not yet reached overweight levels. On that basis, Gao said oil prices are "likely to remain biased to the upside, supported by the U.S.-Iran situation, tighter sanctions on Russian oil and expectations of reduced exports."
Market context
- Prices moved up modestly in early Asian trading, with Brent at $69.74 and WTI at $65.00 at 0126 GMT.
- Geopolitical developments between the U.S. and Iran continue to influence risk premia in crude markets.
- Large U.S. crude inventory builds and strong U.S. labor market data are important countervailing forces shaping near-term price direction.