Oil prices climb on worries of possible Iran-US conflict

Representational photo: Rosneft's Russian-flagged crude oil tanker Vladimir Monomakh transits the Bosphorus in Istanbul, Turkey, Jul 6, 2023. REUTERS

Oil prices settled higher on Friday, reversing earlier losses as traders worried that this week's talks between the US and Iran had failed to reduce the risk of a military conflict between the two countries.

Brent crude futures settled at $68.05 a barrel, up 50 cents, or 0.74%. US West Texas Intermediate crude finished up 26 cents, or 0.41%, at $63.55 a barrel.

In overnight trading, both benchmarks fell, but during the USsession both Brent and WTI rose more than $1 a barrel before moderating gains toward settlement.

Iran and the US held negotiations via Omani mediation to try to overcome sharp differences over Tehran's nuclear programe.

"We keep going back and forth on this Iran situation," said John Kilduff, partner at Again Capital. "It's better one day or even one hour then worse the next. It's status quo nervousness over Iran."

Iranian state TV reported in late afternoon that the talks had ended. Iran's foreign minister said negotiators will return to their capitals for consultations, and the talks will continue.

Ahead of the talks, a lack of consensus on the agenda for the meeting kept investors anxious about geopolitical risk, as Iran wanted to stick to nuclear issues, while the US wanted to discuss Iran's ballistic missiles and support for armed groups in the region.

Any escalation of tension between the two nations could disrupt oil flows, since about a fifth of the world's total consumption passes through the Strait of Hormuz between Oman and Iran.

Saudi Arabia, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, as does fellow OPEC member Iran.

If the prospect of conflict in the region eases, oil prices could decline further.

Kazakhstan's planned oil exports could fall by as much as 35% this month via its main route through Russia, four trading sources have told Reuters, as the giant Tengiz oilfield slowly recovers from fires at power facilities in January.

On a weekly basis, prices were weighed down by a broader selloff in markets and by persistent expectations of an oversupply of oil, analysts said.

Saudi Arabia cut the official selling price of its Arab Light crude to Asia for March to around a five-year low on Thursday, marking the fourth straight month of price cuts.

Weaker oil prices saw the energy majors' profits drop 11% to the lowest level in five years.