Oil down almost 3% on easing concerns before Iran talks

• US and Iran prepare for talks on Friday
• About a fifth of global oil goes via Hormuz
• Volatility leads to record WTI Midland contracts

Oil prices settled down almost 3 percent on Thursday in choppy trading, after the US and Iran agreed to hold talks in Oman on Friday, easing concerns about Iranian crude supplies.

Brent crude futures settled down $1.91, or 2.75 percent, at $67.55 per barrel. US West Texas Intermediate crude settled down $1.85, or 2.84 percent, at $63.29.

“There is still scepticism that any reasonable deal can be made with Iran so even though the market right now is giving talks the benefit of the doubt, we still don’t know what the outcome will be of those talks,” said Phil Flynn, senior analyst with Price Futures Group.

The discussions come as the US builds up forces in the Middle East, and regional players seek to avoid a military confrontation that many fear could escalate into a wider war.

“Differing expectations around the scope and objectives of the talks are sustaining uncertainty, injecting volatility into crude prices as traders reassess the likelihood of escalation versus diplomacy,” analysts at Aegis Hedging said in a note.

About a fifth of the world’s oil consumption passes through the Strait of Hormuz between Oman and Iran. Other Opec members, Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, export most of their crude via the strait, as does Iran.

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Volatility has led investors to rush to lock in oil prices this year, trading a record number of WTI Midland at Houston contracts in January, amid concerns around Middle Eastern supply risks and more Venezuelan barrels heading to the US Gulf Coast.

Strength in the US dollar and volatility in precious metals also weighed on commodities and risk sentiment more broadly on Thursday, analysts said.

On the supply side, discounts on Russian oil exports to China widened to new records this week as sellers cut prices to attract demand from the world’s top crude importer and offset the likely loss of Indian sales, traders said.

This week, a trade deal was announced between the US and India, which agreed to halt purchases of Russian crude.

Argentina’s energy trade surplus could rise in 2026 from last year’s record due to crude output from the Vaca Muerta shale formation, to a range of $8.5 billion to $10 billion, three analysts told Reuters.