| Key Points: – Oil inches up as U.S.-Iran nuclear talks stall without resolution. – Geopolitical risks and strong U.S. data support prices amid market fears. – Bearish sentiment persists due to OPEC+ supply hikes and rising U.S. stockpiles. |
Oil prices edged higher this week as U.S.-Iran nuclear negotiations failed to deliver significant progress, deepening market uncertainty and raising concerns over potential disruptions in global supply. West Texas Intermediate (WTI) crude hovered near $61 a barrel following a fifth round of talks in Rome, where both sides reported “some but not conclusive progress.”
Iranian Foreign Minister Abbas Araghchi acknowledged that while talks had moved forward, critical issues remain unresolved. The lack of a breakthrough is fueling doubts about whether Iranian crude will re-enter the market anytime soon. Traders are watching closely, as failed negotiations could restrict supply from the OPEC member and tighten global markets.
Geopolitical tension is further intensifying sentiment. Reports from U.S. intelligence suggesting that Israel may be preparing to strike Iranian nuclear facilities have added to anxiety in the energy sector. While Iranian officials indicated that a deal limiting nuclear weapons development might be possible, Tehran remains firm on continuing uranium enrichment—an issue that could derail diplomacy.
Meanwhile, strong U.S. economic data helped buoy prices after a brief dip triggered by fresh tariff threats from former President Donald Trump. In a social media post, Trump criticized the European Union as “very difficult to deal with” and suggested a sweeping 50% tariff on EU imports starting June 1. The rhetoric briefly shook markets, but solid U.S. consumer and industrial data helped counterbalance demand fears.
Despite the recent uptick, oil’s broader outlook remains bearish. Crude prices are down about 14% year-to-date, recently touching lows not seen since 2021. A faster-than-anticipated easing of production limits by OPEC+ and rising U.S. commercial oil stockpiles have both added to concerns about oversupply.
Energy strategist Jens Naervig Pedersen from Danske Bank emphasized that bearish sentiment persists. He cited ongoing output hikes by OPEC+, lackluster progress in both trade and nuclear talks, and the possibility of sanctions relief for Iran as factors undermining oil prices.
Looking ahead, a virtual meeting of key OPEC+ producers, including Saudi Arabia, is set for June 1 to decide on output levels for July. Most analysts surveyed by Bloomberg anticipate a continued rise in production, which could further pressure prices.
Adding another wrinkle, the European Commission is proposing to lower the price cap on Russian oil to $50 a barrel. Currently set at $60, the cap was designed to punish Russia for its war in Ukraine while keeping oil flowing. With prices already low, the existing ceiling is seen as ineffective.
In summary, oil is caught in a tug-of-war between geopolitical risk and structural oversupply. Unless a clear resolution emerges in U.S.-Iran talks or OPEC+ shifts its stance on production, the market may remain volatile with a downward bias.