Brent crude oil prices edged lower on Tuesday amid concerns about Iranian military exercises
Iran's naval exercises near the Strait of Hormuz, just before nuclear talks with the U.S. scheduled for later in the day, were seen as a show of force. Brent crude prices fell in Asian markets on Tuesday. Investors worried about supply disruption risks.
Following a 1.33% increase on Monday, Brent crude futures fell 0.47%, or 32 cents, to $68.33 a barrel as of 04:30 GMT. WTI crude rose 62 cents, or 0.99%, to $63.51 a barrel, but this move included all of Monday's price movement as no contract settlement was reached that day due to the U.S. Presidents' Day holiday.
Many markets, including mainland China, Hong Kong, Taiwan, South Korea, and Singapore, were closed on Tuesday for the Lunar New Year holiday. Due to the holidays, it's difficult to gauge market sentiment.
Trump said on Monday that he would "indirectly" participate in the Geneva talks and that he believed Tehran wanted to reach an agreement.
Market sentiment is closely linked to the tone and progress of these negotiations, with a geopolitical risk premium on prices continuing.
Therefore, oil prices are expected to remain volatile, with sharp two-way fluctuations driven more by diplomatic signals than pure supply-demand fundamentals.
Iran began military exercises in the Strait of Hormuz on Monday, a show of force in response to perceived threats. Gulf Arab states are calling for diplomacy to end the dispute.
Iran, along with other OPEC members, Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, exports most of its crude oil, primarily to Asia, via the Strait of Hormuz. China imports 45% of its oil needs from these countries.
Meanwhile, if Brent oil remains in the $65-70 per barrel range in the coming months due to disruptions in Russia's supply, OPEC+ is likely to respond by increasing production from reserve capacity.
According to sources, the group is expected to resume increasing oil production from April onwards as they prepare for high demand in the summer months, and prices are supported by US-Iran tensions.
By the way, in the baseline scenario, if both the Iran and Russia-Ukraine agreements are reached this summer, Brent oil prices are likely to fall to $60-62 per barrel.
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