Oil drops 1% as US inventories surge, and amid US-Iran talks

Oil prices fell on Thursday after US crude inventories recorded their largest increase in three years, alongside signs of weakness in the physical market, as traders assessed whether talks between the United States and Iran could prevent a military conflict that may threaten supply.

Brent crude futures declined to $70.03 per barrel, down 82 cents or 1.16% by 10:21 GMT. US West Texas Intermediate crude fell to $64.63 per barrel, losing 79 cents or 1.2%.

Sharp Rise in US Inventories

Data from the US Energy Information Administration showed that US crude inventories rose by 16 million barrels last week — the largest weekly increase in three years — adding direct pressure on prices.

Giovanni Staunovo, analyst at UBS, said weakness in the physical North Sea market is weighing on prices, noting that markets are closely watching the outcome of the third round of US-Iran talks scheduled for Thursday. The North Sea physical market serves as the pricing benchmark for Brent crude futures.

Despite the recent pullback, oil prices remain up about 15% since the start of 2026, as fears of military escalation between Washington and Tehran have outweighed expectations of a potential supply surplus.

Diplomatic and Military Developments

US envoy Steve Witkoff and Jared Kushner are set to meet an Iranian delegation in Geneva.

Brent prices had reached their highest level since July 31 on Monday after Washington increased its military presence in the Middle East to pressure Iran into negotiations aimed at ending its nuclear and missile programs.

Any prolonged conflict would threaten supply from Iran — OPEC’s third-largest producer — in addition to exports from other countries in the region.

OPEC+ Moves and Saudi Plans

Sources familiar with the matter said OPEC+ may consider increasing production by around 137,000 barrels per day in April, preparing for peak summer demand and aiming to benefit from price support driven by geopolitical tensions.

Other sources indicated that Saudi Arabia is boosting oil production and exports as part of a contingency plan in case a potential US strike on Iran disrupts Middle Eastern supplies.

Risk Premium

Analysts at ING said the outcome of US-Iran nuclear talks will be critical in determining price direction. They added that any constructive agreement could lead markets to reduce a risk premium estimated at around $10 per barrel, which they believe is currently priced into oil markets.