SINGAPORE: Oil prices eased on Thursday, reversing gains made earlier in the Asian trading session, as market participants assessed a US decision to move personnel from the Middle East ahead of talks with Iran over the latter’s nuclear-related activity.
Brent crude futures were down 49 cents, or 0.7 percent, to $69.28 a barrel at 9:30 a.m. Saudi time, while US West Texas Intermediate crude was 41 cents, or 0.6 percent, lower at $67.74 a barrel.
A day earlier, both Brent and WTI surged more than 4 percent to their highest since early April.
US President Donald Trump said the US was moving personnel because the Middle East “could be a dangerous place.” He also said the US would not allow Iran to have a nuclear weapon. Iran has said its nuclear activity is peaceful.
Increased tension with Iran has raised the prospect of disruption to oil supplies. The sides are set to meet on Sunday.
“Some of the surge in oil prices that took Brent above $70 per barrel was overdone. There was no specific threat identified by the US on an Iranian attack,” said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank Australia.
Response from Iran is only contingent on US escalation, Dhar said.
“A pull back (in price) makes sense, but a geopolitical premium that keeps Brent above $65 per barrel will likely persist until further clarity on US-Iran nuclear talks is revealed,” he added.
The US is preparing a partial evacuation of its Iraqi embassy and will allow military dependents to leave locations in the Middle East due to heightened security risk in the region, Reuters reported on Wednesday citing US and Iraqi sources.
Iraq is the second-biggest crude producer after Saudi Arabia in the Organization of the Petroleum Exporting Countries.
Military dependents can also leave Bahrain, a US official said.
Prices weakened having hit key technical resistance levels during Wednesday’s rally, plus some market participants are betting on Sunday’s US-Iran meeting resulting in reduced tension, said OANDA senior market analyst Kelvin Wong.
Trump has repeatedly said the US would bomb Iran if the two countries cannot reach a deal regarding Iran’s nuclear-related activity including uranium enrichment.
Iran’s Minister of Defense Aziz Nasirzadeh on Wednesday said Iran will strike US bases in the region if talks fail and if the US initiates conflict.
US Special Envoy Steve Witkoff plans to meet Iranian Foreign Minister Abbas Araghchi in Oman on Sunday to discuss Iran’s response to a US proposal for a deal.
Separately, US crude inventories fell 3.6 million barrels to 432.4 million barrels last week, the Energy Information Administration said. Analysts polled by Reuters had expected a draw of 2 million barrels.
