The talks, mediated by Oman, aimed to bridge significant gaps regarding Iran’s nuclear program. Market participants interpreted Iran’s signals to mean this initial round in Muscat would merely establish a roadmap for future dialogue. Persistent tensions pose a risk to oil flows, as approximately one-fifth of global oil consumption passes through the Strait of Hormuz, located between Oman and Iran. Major exporters like Saudi Arabia, the UAE, Kuwait, Iraq, and Iran itself rely heavily on this route. A genuine reduction in regional tensions could lead to further price declines.
Analysts also cite escalating disputes between the United States and Iraq’s new government as a supportive factor for prices. While Iraqi politicians reportedly favor Nouri al-Maliki for prime minister, the U.S. views him as overly aligned with Iran. President Trump has warned Baghdad of consequences should al-Maliki assume the role.
In related market developments, India is cautiously reducing its purchases of Russian oil following a U.S. trade agreement. Consequently, Russian crude is being offered in China at steeper discounts to attract refiners there.
This week, the discount for Russia’s ESPO blend, shipped from the Far Eastern port of Kozmino, widened to nearly $9 per barrel against Brent, up from the $7–$8 range in recent months, according to trade sources.
Separately, the American Petroleum Institute (API) reported a substantial drawdown in U.S. crude inventories, estimating a drop of 11.1 million barrels for the week ending January 30. This follows a minor decrease of 247,000 barrels the prior week.