Oil Holds Near $67 on Anticipation of US-Iran Talks; US Natural Gas Drops to Four-Month Low

Global Markets | EcoPulse24

Oil prices traded in a narrow range at the start of the week after posting their first double weekly decline this year, as investors focused on pivotal geopolitical developments that could reshape supply in the coming months. Brent crude futures settled near $67.7 per barrel, with US West Texas Intermediate around $62.8, amid clear caution before the second round of US-Iran talks scheduled for Tuesday. An Iranian minister indicated Tehran's readiness to compromise for a nuclear deal, provided US sanctions relief is discussed - potentially paving the way for some Iranian exports to return to global markets.

Concurrently, the US is leading negotiations to resolve the Ukraine conflict, though a quick solution remains unlikely, reducing the chances of Russian supply returning to previous levels in the near term. Despite the sensitive geopolitical backdrop, oil prices remain under pressure from oversupply, with reports suggesting some OPEC+ members see room for production increases in April. The International Energy Agency reaffirmed its forecast of a significant supply surplus by 2026, lowering its global oil demand growth estimates, reinforcing the market view of a gradual shift toward oversupply, especially with US production staying high.

In the US natural gas market, futures dropped to about $3.02 per million British thermal units, a four-month low, amid weaker heating demand forecasts due to warmer weather expected in the central and southern US over the next two weeks, according to the National Weather Service. The sharp movement was also attributed to thin liquidity during the Presidents' Day holiday, amplifying price volatility.

Despite the recent drop, structural fundamentals remain relatively supportive: US gas inventories are about 130 billion cubic feet below the five-year average, and LNG exports remain near record highs, sustaining strong external demand.

In refined products, gasoline prices rose to $1.91 per gallon, a slight daily increase of 0.05% and a monthly gain of about 6.83%, though still roughly 9.12% below last year. Heating oil contracts fell to around $2.38 per gallon, losing earlier gains due to lower crude costs and expected weak seasonal demand. Despite a 5.6 million-barrel draw in distillate stocks, higher refinery runs kept product flows steady and eased supply concerns. Cheaper natural gas and increased drilling activity are encouraging a shift away from fuel oil, further pressuring prices.

EcoPulse24 Analysis:
Oil markets are currently at a crossroads between two opposing forces: geopolitical risks that could trigger supply shocks, and a fundamental picture trending toward a growing surplus by 2026. Any breakthrough in the Iranian or Ukrainian files could add new barrels to the market, limiting Brent's short-term recovery above $70. Conversely, any unexpected escalation would support prices. For gas and refined products, weather and seasonal demand will remain the main short-term drivers, while inventory and export dynamics will determine the medium-term trend.