Oil prices dipped on Tuesday as informal talks between the United States and Iran restarted, possibly restarting a nuclear deal that would see restrictions on Iranian oil shipments lifted, bolstering global supplies.
Brent crude was trading at $92.55 a barrel at 03:47 GMT, down 40 cents, or 0.15 percent, after touching a seven-year high of $94 on Monday. The price of West Texas Intermediate crude in the United States fell by one cent to $91.31 a barrel.
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Crude prices rose for the seventh week in a row last week, pushed by concerns about supply interruptions fueled by cold weather in the United States and persistent political uncertainty among key world producers.
If US sanctions are repealed, Iran may export millions of barrels of petroleum in a matter of weeks, helping to bring down soaring oil prices.
Strong global demand, continued tensions in Eastern Europe, and possible supply interruptions due to cold weather in the United States have pushed both oil contracts to seven-year highs.
After a 10-day hiatus, talks in Vienna on renewing the 2015 Iran nuclear deal will resume on Tuesday. The US has restored some sanctions waivers, but Iran is demanding the complete removal of sanctions and a promise from the US that no more punitive measures will be taken.
However, the drop in oil prices could only be temporary. While excitement about the US-Iran discussions prompted some profit-taking, OANDA analyst Edward Moya believes the price downturn will be short-lived because the oil market remains in a supply deficit.
Saudi Arabia increased crude oil prices for March
Saudi Aramco announced on Saturday that it had boosted prices in March from February for all oil grades it sells to Asia, in line with market forecasts.
According to Aramco, the world’s biggest oil exporter hiked its March pricing for its Arab Light crude grade for Asian customers by 60 cents a barrel compared to February, resulting in a premium of $2.80 a barrel over the Oman/Dubai average.
Arab Light crude for March to the United States was up 30 cents a barrel from February, with a margin of $2.45 a barrel over the ASCI (Argus Sour Crude Index).
Prices to Northwestern Europe for the same grade were fixed at a 10 cents per barrel reduction to ICE Brent, up to $1.70 per barrel from February.
The price hikes represented robust demand in Asia and higher gasoil and jet fuel margins.
A widespread power failure in Texas put refineries off of production on Friday as frigid temperatures from an Arctic cold front slammed the Gulf Coast, however, some refineries are rebounding or have now been restored to near-normal operations.
Crude oil future prospects relieved lower as the prospect of Iranian oil entering the market weighed on sentiment, ANZ Research analysts wrote in a note on Tuesday, mentioning that negotiators had cited progress in making an agreement that would eventually recover the country’s sanctioned oil to world markets.
Citing Saudi Arabia’s recent increase in oil prices as well as the unexpected shutdown of a U.S. refinery they wrote that additional bullish signals for oil continue to emerge.
Crude prices, which have risen roughly 20% this year, are expected to approach $100 per barrel due to strong global demand, according to economists.
The oil market is presently overvalued and prepared for a drop, according to the relative strength index (RSI), a momentum indicator.