ING’s Warren Patterson and Ewa Manthey note that ICE Brent fell over 1% as hopes grow for a US–Iran diplomatic solution, even as US military assets build up in the Middle East. They highlight bearish US inventory data and warn that, despite a strong backdrop, OPEC+ is likely to resume supply increases from April.

Brent pressured by Iran talks and stocks

"Oil prices weakened yesterday, with ICE Brent settling a little more than 1% lower amid hopes that the US and Iran will reach a diplomatic solution. There were reports yesterday that Iran is ready to strike a deal as soon as possible. This noise comes ahead of another round of planned talks between the US and Iran on Thursday."

"At the same time, the US continues to build up military assets in the region. So, without a deal, the probability of military action is high and growing. President Trump’s 10-to-15-day deadline for Iran works out to a date sometime in very early March."

"This uncertainty means the market will continue to price in a large risk premium and remain sensitive to any fresh developments."

"US inventory numbers from the American Petroleum Institute (API) were bearish, with US crude oil inventories increasing by 11.4m barrels over the week. This is well above the 1.9m barrels the market was expecting."

"The next OPEC+ meeting is scheduled for 1 March, and given the broader market strength, the group is likely to resume supply increases from April. This is despite the oil balance sheet suggesting that the market doesn’t need additional supply."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)