Oil prices moved lower in Asian trade on Thursday as markets reduced some of the risk premium that had been built into crude in recent sessions following confirmation that U.S. and Iranian officials will meet on Friday.
The market was additionally weighed by a stronger U.S. dollar, which gained traction ahead of key U.S. nonfarm payrolls data for January due Friday, and by the run-up to major central bank decisions in Europe and the U.K. on Thursday.
After a strong rally on Wednesday, crude reversed course with traders taking profits. Despite Wednesday’s gain, oil remained on course to close the week in negative territory after earlier larger losses during a broader rout across commodity markets.
Price moves and timing
By 20:42 ET (01:42 GMT), Brent futures for April had fallen 1.4% to $68.50 a barrel, while West Texas Intermediate futures slipped 1.3% to $63.80 a barrel.
Inventory support amid weather-related disruption
Some support for crude came from U.S. data showing that inventories declined by more than expected in the past week. The report attributed the drawdown in part to extreme cold weather that disrupted production across parts of the United States.
U.S.-Iran meeting confirmed, agenda remains contested
Officials from both Washington and Tehran confirmed this week that a meeting will take place in Oman on Friday, though differences persist over what topics will be on the table. The U.S. has insisted that negotiations must include Tehran’s missile arsenal, while Iran has said it will only discuss its nuclear program. Those disagreements over the agenda had earlier cast doubt on whether the talks would occur at all - an uncertainty that had previously pushed oil prices higher.
Markets had also been factoring in a larger risk premium amid concerns that U.S. President Donald Trump might follow through on threats to carry out fresh strikes against Iran.
Dollar strength and policy events add pressure
The greenback attracted increasing bids this week, pressuring dollar-denominated commodities such as crude. Traders moved into the dollar ahead of anticipated interest rate decisions by the Bank of England and the European Central Bank on Thursday, and with attention firmly on U.S. nonfarm payrolls for guidance on the path for U.S. interest rates.
The dollar’s recovery from near four-year lows was also linked in market commentary to the nomination of Kevin Warsh as the next Federal Reserve chairman - a pick viewed as less dovish - which contributed to a sharper dollar rise during the week.
Market participants are watching January nonfarm payrolls, due Friday, for more definitive signals on U.S. monetary policy and how that might feed back into currency and commodity prices.
Note: This article summarizes market moves, official confirmations of a planned U.S.-Iran meeting and the timing of central bank and economic data events as reported during Asian trading on Thursday. It does not introduce additional events or assertions beyond those confirmed in market reports.