Oil prices slipped for a third session on Wednesday on profit taking due to concerns of a possible rise in supplies from Iran despite industry data showing a surprised drop in U.S. oil inventories.
U.S. West Texas Intermediate crude was at $89.60 a barrel, down 14 cents, or 0.15%.
The contracts slid about 2% on Tuesday as Washington resumed indirect talks with Iran to revive a nuclear deal. Such a deal could lift U.S. sanctions on Iranian oil and quickly add supplies to the market, although a number of vital issues still need to be ironed out.
“With the negotiations ongoing, the oil price is likely to lose steam in the next week, despite the bump higher we’ve seen today,” said CMC Markets’ analyst Tina Teng, adding that there has also been some profit taking among investors who have turned cautious after prices hit more than seven-year highs.
OCBC economist Howie Lee said investors might view the Iran nuclear talks as an opportunity to take some profit but doubt the downward price decline would be severe as fundamentals are still very tight.
“U.S. going to Iran to reopen sanctions waiver talks shows… how tight the market is,” he added.
Governments from the United States to Japan are looking at ways to tackle high oil prices as inflation soars.
“Undersupply is the key factor that has pumped up the oil price,” CMC Market’s Teng said.
U.S. crude, gasoline and distillate stocks fell last week, according to market sources citing American Petroleum Institute figures on Tuesday. Crude inventories fell 2 million barrels, according to API, versus analysts’ expectations of a 400,000-barrel increase.
More data from the U.S. EIA will be available at 10:30 a.m. EST (1530 GMT).
However, oil prices at near $100 a barrel could also draw more production from the United States. The Energy Information Administration expects U.S. crude output to rise 770,000 barrels per day to 11.97 million bpd in 2022.
In Europe, concerns over Ukraine eased as French President Emmanuel Macron said he believed steps could be taken to de-escalate the crisis after a meeting with Russian President Vladimir Putin and called on all sides to stay calm.