US-Iran Dialogue Lifts Oil Sentiment: Brent Crude Stabilizes Near $94 Amid Supply Jitters

US-Iran Dialogue Lifts Oil Sentiment: Brent Crude Stabilizes Near $94 Amid Supply Jitters​

Global crude oil prices found signs of stabilization after a sharp selloff, gaining cautious support following renewed diplomatic discussions between the United States and Iran. Brent crude stabilized above $94 a barrel, recovering from a fall of nearly 5% in the previous session. Meanwhile, US benchmark WTI traded closely to $90.

The recovery in sentiment is directly linked to the continued effort to resume negotiations. Both parties are working toward extending a ceasefire that is slated to expire next week, creating a degree of cautious optimism in the market. However, underlying geopolitical tensions continue to keep the oil complex highly volatile.

Geopolitical Hurdles and Negotiations Drive Volatility​

The path to stable pricing remains fraught with risk. The US continues to enforce a naval blockade in the Strait of Hormuz, which is a critical global oil transit chokepoint. This action aims to restrict Iranian oil exports.

Tehran, meanwhile, is reportedly considering a temporary halt to its oil shipments through the disputed route. While this could avert direct confrontation, such a move would significantly strain already fragile global supply lines. Historically, shipping activity through the strait has been severely curtailed since the conflict began.

Inventory Data and Demand Worries Cloud Outlook​

Beyond the diplomatic efforts, fundamental market factors are exerting downward pressure. The International Energy Agency has already cautioned about weaker demand growth this year, citing the weight of elevated oil prices on consumer spending.

Furthermore, supply data added to the bearish sentiment. US crude inventories increased by 6.1 million barrels last week, according to the American Petroleum Institute. If confirmed by official figures, this would mark the eighth consecutive weekly increase, suggesting ample supply in the world's largest oil-consuming nation.

Analysts Predict Supply Recovery, Flag Policy Risks​

Market participants are intensely focused on the outcome of the ongoing geopolitical talks. Analysts at ANZ Group suggest that any significant easing of tensions could trigger a phased recovery in Middle Eastern supply. They estimate this recovery could potentially restore 2-3 million barrels per day within the next month.

However, the outlook is tempered by pending policy decisions. A temporary waiver allowing limited purchases of Iranian oil is set to expire this weekend. Such an expiry could potentially tighten global supply again, complicating the otherwise stabilizing trajectory of prices.