Oil prices ease as market assesses Middle East tension
Oil prices eased on Thursday, reversing gains made earlier in the Asian trading session, as market participants assessed a U.S. decision to move personnel from the Middle East ahead of talks with Iran over the latter's nuclear-related activity.
Brent crude futures were down 30 cents, or 0.4 per cent, to $69.47 a barrel at 0433 GMT, while U.S. West Texas Intermediate crude was 23 cents lower, or 0.3 per cent, at $67.92 a barrel.
A day earlier, both Brent and WTI surged more than 4 per cent to their highest since early April.
U.S. President Donald Trump said the U.S. was moving personnel because the Middle East "could be a dangerous place". He also said 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 sides are set to meet on Sunday.
"Some of the surge in oil prices that took Brent above $70 per barrel was overdone. There was no specific threat identified by the U.S. on an Iranian attack," said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank Australia.
Response from Iran is only contingent on U.S. escalation, Dhar said.
"A pull back (in price) makes sense, but a geopolitical premium that keeps Brent above $65 per barrel will likely persist until further clarity on U.S.-Iran nuclear talks is revealed," he said.
The U.S. is 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, Reuters reported on Wednesday citing U.S. and Iraqi sources.
Iraq is the second-biggest crude producer after Saudi Arabia in the Organization of the Petroleum Exporting Countries.
Military dependents can also leave Bahrain, a U.S. official said.
Prices weakened having hit key technical resistance levels during Wednesday's rally, plus some market participants are betting on Sunday's U.S.-Iran meeting resulting in reduced tension, said OANDA senior market analyst Kelvin Wong.
Trump has repeatedly said the U.S. would bomb Iran if the two countries cannot reach a deal regarding Iran's nuclear-related activity including uranium enrichment.
Iran's Minister of Defense Aziz Nasirzadeh on Wednesday said Iran will strike U.S. bases in the region if talks fail and if the U.S. initiates conflict.
U.S. Special Envoy Steve Witkoff plans to meet Iranian Foreign Minister Abbas Araghchi in Oman on Sunday to discuss Iran's response to a U.S. proposal for a deal.
Even so, expectations of a deal are evaporating as Trump has said he is less confident about whether he can convince Iran to stop its nuclear activity, ANZ analysts in a research note.
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