Oil prices retreat prior to US-Iran nuclear talks

Shafaq News

Oil prices fell on Tuesday, easing for a second day, as
market participants weighed the possibility of a de-escalation in U.S.-Iran
tensions, while a firmer dollar placed greater downside pressure on prices.

Brent crude futures fell 39 cents, or 0.5%, at $65.91 per
barrel at 0330 GMT. U.S. West Texas Intermediate crude was at $61.83 per
barrel, down 31 cents, or 0.5%.

Oil prices fell more than 4% on Monday after U.S. President
Donald Trump said Iran was “seriously talking” with Washington,
signaling a de-escalation of tensions with the OPEC member.

Iran and the U.S. are expected to resume nuclear talks on
Friday in Turkey, officials from both sides told Reuters on Monday, and Trump
warned that with big U.S. warships heading to Iran, bad things could happen if
a deal was not reached.

“The sharp up-and-down moves in oil prices over the
last few sessions look more like sentiment-driven trading rather than any major
shift in fundamentals,” said Phillip Nova senior market analyst Priyanka
Sachdeva. “After last week’s rally, markets quickly gave back gains as
broader risk assets also turned volatile.”

“With no fresh escalation on the geopolitical front and
macro data still mixed, oil clearly failed to hold onto gains.”

Weighing on prices further, the U.S. dollar index hovered
near a high of more than a week. A stronger greenback hurts demand for
dollar-denominated crude from foreign buyers.

“The continued recovery in the US dollar yesterday,
following President Trump’s nomination of Kevin Warsh as the next Federal
Reserve chair, also exerted downward pressure on oil prices,” ING analysts
said in a note.

On the trade front, Trump on Monday unveiled a deal with
India that slashes U.S. tariffs on Indian goods to 18% from 50% in exchange for
India halting Russian oil purchases and lowering trade barriers.

“Overnight, the US and India agreed on a trade deal …
if we do see this happen, it will only lead to a further increase in the amount
of Russian oil floating at sea,” the ING analysts said.

Trump announced the deal on social media following a call
with Indian Prime Minister Narendra Modi, noting that India had agreed to buy
oil from the U.S. and possibly Venezuela.

Some analysts said they were expecting volatile price
movements this month.

“Looking ahead into February, prices are likely to
remain choppy and range-bound … (they) are expected to stay highly reactive
to headlines and macro cues rather than a decisive trend, with risk skewed to
the downside,” said Phillip Nova’s Sachdeva.

(Reuters)

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