Oil prices declined in Asian trading on Monday after officials from the United States and Iran indicated they will keep negotiating over Tehran’s nuclear program, reducing immediate concern about a military escalation in the Middle East. Market attention was also fixed on a relatively strong U.S. dollar ahead of several important U.S. economic reports, as well as major data due this week from China.
By 21:17 ET (02:17 GMT), Brent futures for April were down 0.7% at $67.57 a barrel. West Texas Intermediate futures fell 0.7% to $63.12 a barrel at the same time.
Diplomatic signals and market reaction
Over the weekend, Washington and Tehran said indirect nuclear talks that took place in Oman on Friday would continue, describing the discussions as positive. That messaging helped to temper market anxiety that a U.S.-Iran military confrontation was imminent. Earlier in the year, Washington had deployed several warships to the region, and traders had, at times, put a higher risk premium on oil amid fears of conflict. The article notes that former President Trump had also threatened military action against Tehran, a factor that previously fed those concerns.
Despite the diplomatic thaw, the report notes Tehran signaled it will continue its nuclear enrichment program, leaving aspects of the broader dispute unresolved.
Macro data and currency dynamics
Beyond geopolitics, the dollar’s relative strength was cited as another source of pressure on crude after oil fell about 2% in the previous week. Market participants were awaiting a slate of U.S. economic releases this week that could influence expectations for interest rates, and thereby expectations for the dollar and demand for commodities.
Key U.S. reports scheduled include nonfarm payrolls data for January due on Wednesday, followed by the consumer price index for January on Friday. These prints are expected to be closely watched for guidance on interest rate prospects, with markets also still gauging the outlook for monetary policy under Warsh.
China, the world’s largest oil importer, is also posting important data this week. January CPI figures are due on Friday, arriving just before the country begins its week-long Lunar New Year holiday - a period generally associated with increased travel and higher fuel consumption. That timing raises focus on whether the data will provide clarity on near-term fuel demand in China.
Outlook
The combination of reduced immediate geopolitical risk, a firm dollar and a week of critical data from the U.S. and China contributed to the downward pressure on crude prices in Asian trade. Market participants will likely track both the course of diplomatic negotiations and the incoming economic reports for further direction on oil markets.