Oil holds above $70 despite record US inventory build; US-Iran talks drive sentiment

Brent crude prices have remained above the $70/bbl mark since mid-last week and held firm above $71/bbl across several sessions, as geopolitical risk tied to ongoing US-Iran nuclear negotiations offset the impact of the largest US crude inventory build in three years.

Brent settled at $70.85/bbl on Wednesday, up 8 cents on the day, while WTI crude closed at $65.42/bbl, down 21 cents. At the time of writing on Thursday, Brent was hovering near $71.06/bbl, while WTI traded around $65.58/bbl, as investors awaited developments from the third round of US-Iran nuclear talks in Geneva.

US-Iran diplomacy sustains geopolitical risk premium

Market sentiment remains heavily influenced by diplomatic developments between the United States and Iran. Analysts estimate that crude prices currently include a geopolitical risk premium of up to $10/bbl. A successful diplomatic outcome could gradually reduce this premium, while a breakdown in negotiations could sustain or increase upward pressure on prices.

Statements from both sides have kept markets cautious. The US reiterated its stance on preventing Iran from acquiring nuclear weapons, while Iran indicated that a diplomatic resolution remains possible. This uncertainty has maintained volatility but prevented sharp directional price movements.

Record US inventory build limits upside

Capping further gains, US crude inventories rose sharply by 16 million barrels last week, according to the Energy Information Administration (EIA), marking the largest weekly increase since February 2023. The increase was driven by higher imports, reduced exports, and lower refinery utilization, which fell to 88.6%.

Despite the bearish inventory data, Brent has remained resilient above $70/bbl, highlighting the strength of geopolitical support in the market.

Supply outlook adds further uncertainty

Additional uncertainty stems from supply-side developments. Saudi Arabia is reportedly increasing output and exports as a precaution against potential supply disruptions, while OPEC+ is expected to consider a modest production increase of approximately 137,000 barrels per day for April.

If diplomatic tensions ease and additional supply enters the market, weaker physical fundamentals could weigh on prices. However, for now, crude markets remain supported primarily by geopolitical caution rather than inventory trends.

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