Oil steadies as U.S. stockpiles shrink, Iran diplomacy in focus

Oil edged higher in early Asian trading after a surprise drop in U.S. crude stockpiles aided the demand outlook, outweighing the prospect of a return of official oil exports from Iran.

Oil was steady with dwindling U.S. inventories and roaring demand offset by the potential return of supplies from Iran.

Futures in New York traded near US$90 a barrel on Thursday after rising 0.3 per cent in the previous session. U.S. crude stockpiles fell by about 4.8 million barrels last week, according to government data, with nationwide oil stockpiles the lowest since 2018. Investors are also keeping a keen eye on the talks aimed at reviving a nuclear agreement with Iran. A deal that addresses the concerns of all sides is in sight, White House Press Secretary Jen Psaki said Wednesday.

Elsewhere, Russian forces started joint military exercises in Belarus that include drills near the border with Ukraine, as well as close to Poland and Lithuania, both of which are NATO members. Russia has repeatedly denied it plans an attack on Ukraine after the U.S. and its allies warned a buildup of close to 130,000 Russian troops near the Ukrainian border might be preparation for an attack. 

Oil’s 2022 rally has cooled this week after a run of weekly gains propelled prices to the highest since 2014. Stronger-than-expected demand and a series of supply outages helped to tighten the market, which has been exacerbated by the inability of OPEC+ to meet its targeted output pledges.

The prospects for world powers resuming the nuclear agreement with Iran have become more likely amid a flurry of diplomacy as talks resumed this week in Vienna. A deal would pave the way for an increase in official crude exports from the OPEC producer, alleviating some market tightness.