Oil futures moved slightly lower on Wednesday as developments in talks between the United States and Iran raised expectations that bilateral tensions could ease, diminishing immediate concerns about disruptions to oil flows from a key Middle Eastern producer.
At 0139 GMT, Brent futures were down 3 cents, or 0.04%, at $67.39 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 5 cents, or 0.08%, to $62.28. Both contracts were trading around two-week lows.
Diplomatic exchanges between Iran and the United States produced an understanding on main "guiding principles" aimed at resolving their long-standing nuclear dispute. Iranian Foreign Minister Abbas Araqchi cautioned, however, that this understanding "does not mean a deal is imminent."
"While a meaningful breakthrough would ease geopolitical tensions and potentially boost Iranian oil supply, we remain sceptical that this outcome will be achieved in the short term," Tony Sycamore, an IG market analyst, said in a client note.
Political consultancy Eurasia Group said in a note to clients on Tuesday that it assesses a 65% probability of U.S. strikes against Iran by the end of April, underscoring persistent uncertainty about future geopolitical developments.
Supply-side sentiment was also influenced by reports that output at the Tengiz oil field in Kazakhstan - one of the world’s largest - was rising after a suspension in January. Tengiz plans to reach full capacity by February 23, according to reports.
Traders were also preparing for weekly U.S. oil data that could influence near-term price direction. The American Petroleum Institute's weekly report was due later in the day, followed by the Energy Information Administration's official weekly statistics on Thursday.
Analysts polled by Reuters estimated U.S. crude oil stockpiles likely rose in the week to February 13, while inventories of distillates and gasoline probably fell. Their expectations were for crude inventories to have climbed by about 2.3 million barrels, gasoline stockpiles to have declined by around 200,000 barrels, and distillate inventories - which include diesel and heating oil - to have dropped by about 1.6 million barrels.
With diplomatic progress remaining tentative and mixed signals on supply recovery from major fields, market participants were balancing the immediate downward pressure on prices against the possibility of renewed volatility should geopolitical tensions flare anew or inventory data surprise the market.
Summary - Oil prices eased to near two-week lows after preliminary progress in U.S.-Iran talks reduced the perceived risk of Middle Eastern supply disruptions, while reports of rising output at Kazakhstan's Tengiz field and upcoming U.S. inventory data kept traders cautious.