Oil prices declined on Thursday after hitting their highest in more than two months after President Donald Trump said U.S. personnel were being moved out of the Middle East, which raised fears that escalating tensions with Iran could disrupt supply.
Brent crude futures dipped 0.42 percent or 29 cents to $69.48 a barrel, as of 4:35 GMT, while U.S. West Texas Intermediate crude fell 0.34 percent or 23 cents to $67.92. The fall in oil prices comes after both Brent and WTI surged more than 4 percent to their highest since early April on Wednesday.
Geopolitical premium to keep Brent above $65 per barrel
On Wednesday, Trump said U.S. personnel were being moved out of the Middle East because “it could be a dangerous place,” adding that the United States would not allow Iran to have a nuclear weapon. Iran has said its nuclear activity is peaceful. Increased tension with Iran has raised the prospect of disruption to oil supplies. The two sides are set to meet on Sunday.
Analysts noted that a decline in oil prices is natural, as no threat was identified by the U.S. of an Iranian attack. However, a geopolitical premium that keeps Brent above $65 per barrel will likely persist until further clarity on U.S.-Iran nuclear talks is revealed. The White House has warned it would consider military measures should negotiations fail, further raising the geopolitical risk premium to crude.
The U.S. is also preparing a partial evacuation of its Iraqi embassy and will allow military dependents to leave locations in the Middle East due to heightened security risk in the region. Iraq is the second-largest crude producer after Saudi Arabia in the Organization of Petroleum Exporting Countries.
U.S. Special Envoy Steve Witkoff plans to meet with Iranian Foreign Minister Abbas Araghchi in Oman on Sunday to discuss Iran’s response to a U.S. proposal for a deal. However, expectations of a deal are dwindling as Trump has said he is less confident about whether he can convince Iran to stop its nuclear activity.
U.S. crude inventories fall
Further supporting the recent rally in oil prices, U.S. crude inventories fell 3.6 million barrels to 432.4 million barrels last week, the Energy Information Administration said.
In addition, President Trump said on Wednesday that a trade framework with China is “done,” subject to approval by him and President Xi Jinping. The deal grants China export licenses for rare earth minerals and magnets, while the U.S. will allow continued access for Chinese students. Washington will maintain a total tariff rate of 55 percent on Chinese imports, with China retaining a 10 percent tariff on American goods, Trump said in a social media post.
Trump added that he will send letters in the coming weeks to key trading partners, outlining “take it or leave it” tariff offers ahead of a July 9 deadline tied to his pause on sweeping “liberation day” tariffs. He said he is open to extending that deadline, but expects it won’t be necessary.
These developments reduced some uncertainty in global trade and improved the outlook for economic growth, which typically drives higher demand for oil.
