Oil prices retreated today after yesterday’s rebound, with geopolitical events dominating price action and fuelling a volatile environment.
The developments in the Middle East remain a strong catalyst for crude and could continue to drive the market’s direction over the short-term.
The confirmation that talks between the US and Iran will be held in Oman on Friday limited concerns about an immediate escalation in the oil-rich region.
However, the market could react strongly to any new setbacks as worries about the impact on the energy infrastructure and supply in the region remain high. As a result, the talks will be under scrutiny, fuelling caution in the meantime.
At the same time, the latest API and EIA data showed US crude inventories declined last week more than expected, helping to cushion the downside risks to a certain extent. Nevertheless, the overall oversupply concerns remain present and could push the market further, provided geopolitical risks abate.
