Oil Prices Fall Amid Anticipation of Nuclear Negotiation Results with Iran

SadaNews - Oil prices have fallen as investors assess the prospects of a nuclear deal between the United States and Iran, with further negotiations on this matter expected later this week while U.S. forces gather in the Middle East.

Brent prices fell to nearly $71 a barrel after closing with little change on Friday, even after U.S. President Donald Trump stated he was considering a limited military strike against Iran. West Texas Intermediate prices also decreased on Monday.

Iranian Foreign Minister Abbas Araghchi told CBS on Sunday that there is a "good opportunity for a win-win diplomatic solution, and the solution is within reach." He added that he expects to meet with U.S. Special Envoy Steve Metallidis for talks, which will be held in Geneva.

Concerns Over Conflict with Iran Support Prices

Oil prices rose at the beginning of the year, despite general forecasts of a global surplus, as fears about a U.S. conflict with Iran helped drive prices higher.

Traders rushed to take precautionary measures against the potential for escalating tensions, leading to increased activity in futures and options markets.

Harris Khurshid, Chief Investment Officer at Karobar Capital, stated, "Markets can withstand headlines, but they will not ignore supply loss."

He added, "If exports from Iran are affected or there is credible intervention in the Strait of Hormuz, which is highly likely should things escalate, this is when oil prices will quickly reassess themselves."

The Strait of Hormuz is a narrow passage separating Iran and the Arabian Peninsula, through which tankers carrying oil and liquefied natural gas pass daily to deliver shipments worldwide. However, Tehran only needs to disrupt flows, rather than impose a full blockade on the strait, to impact global oil markets.

Saudi Arabia, Iraq, and Kuwait ship oil through Hormuz, with the vast majority of their shipments heading to Asia, while Iran pumps over 3 million barrels per day of crude oil, around 3% of global production, with most flows heading to China.

Spot Premium for Brent Narrows Despite Rising Tensions

Despite concerns about escalating hostilities in the Middle East, the spot premium for Brent prices, which is the difference between its two nearest contracts, has narrowed in a backwardation structure.

This widely monitored indicator reached 41 cents per barrel on Monday, compared to over one dollar at the end of January.

Khurshid from Karobar Capital commented, "Monitor the time spreads, and watch diesel/gas oil inventories and OPEC discipline." He added, "If product markets tighten or the curve shifts towards a sharper decline, that tells you it is real."

In the latest transactions, April WTI contracts fell by 1% to $71.02 a barrel at 3:06 PM in Singapore, while West Texas Intermediate contracts dropped by 1.1% to trade at $65.74 a barrel.