Oil prices trimmed part of their earlier advances on Wednesday after reports first said nuclear negotiations between the United States and Iran had been canceled and later indicated the talks were back on. Developments between the two countries remained the dominant influence on price movements, with market participants also reacting to industry inventory data showing a significant one-week drop in U.S. crude stocks.
At 14:55 ET (19:55 GMT), Brent crude futures for April were up 1.9% at $68.61 a barrel, having climbed to $69.75 at their session high. West Texas Intermediate futures rose 1.7% to $64.27 a barrel.
Initial coverage reported that the planned meeting - scheduled for Friday - had collapsed after the U.S. refused to alter its proposed location and format. That account was followed by reports that the talks had been reinstated after urgent lobbying by several Arab and Muslim leaders urging the U.S. administration not to walk away from the discussions.
Iran's foreign minister, Seyed Abbas Araghchi, posted on X that the meeting was set to take place in Muscat on Friday. Earlier statements from Iranian officials had said they wanted the talks confined to two-way negotiations focused solely on nuclear issues, raising doubts over whether the dialogue would proceed.
Geopolitical tensions also intensified overnight. U.S. forces shot down an Iranian unmanned aerial vehicle that was reported to be approaching a U.S. aircraft carrier in the Arabian Sea. In a separate incident, a group of Iranian gunboats were reported to have approached a U.S.-flagged tanker in the Strait of Hormuz. Such incidents underline the potential for military escalation in the region.
U.S. President Donald Trump has warned of further military action against Iran if Tehran does not comply with U.S. demands to rein in its nuclear program, while Iranian authorities have cautioned they would respond bitterly to any U.S. aggression. Market participants noted that any increase in military activity in the Middle East could disrupt supplies of oil from the region - a prospect that has lent support to prices in recent sessions.
Alongside the geopolitical backdrop, oil received a boost from industry-supplied inventory figures. Data released by the American Petroleum Institute showed U.S. crude inventories fell by 11.1 million barrels in the week to January 30, a substantial unexpected draw compared with market expectations for a build of 0.7 million barrels.
The API figures often presage similar moves in the official government inventory report, which was due later in the day. The unusually large draw reported by the API comes as extreme cold weather throughout the United States disrupted oil production and also hampered exports from the Gulf Coast. These supply interruptions within the U.S. have been a factor supporting oil prices over recent weeks.
Traders and analysts were weighing the twin influences of renewed hopes for diplomacy and the immediate effects of physical supply disruptions. The interplay between potential de-escalation in diplomatic stances and the tangible short-term supply shortfall added to market volatility during the session.
Given the fluid nature of both the diplomatic signals and the U.S. inventory situation, market participants noted the path for prices remains uncertain in the near term. Official government inventory data and any further developments in the region are expected to drive price direction in the coming days.
Contributors: Reporting relied on industry inventory data and multiple overnight accounts of naval and diplomatic activity in the Middle East.