Oil prices declined for the third consecutive session on Thursday as an unexpected rise in U.S. crude and refined fuel inventories signaled weaker demand from the world’s largest consumer while traders assessed the potential market impact of renewed nuclear negotiations between the United States and Iran.
Brent crude futures fell 16 cents to $64.75 per barrel by 07:30 a.m. in Nigeria while U.S. West Texas Intermediate (WTI) dipped 10 cents to $61.47. Both benchmarks had slipped earlier in the session following data from the U.S. Energy Information Administration (EIA) showing a surprise increase in crude stockpiles.
According to the EIA, U.S. crude inventories rose by 1.3 million barrels to 443.2 million barrels in the week ending May 16, defying analysts’ expectations of a 1.3 million-barrel drawdown.
Gasoline and distillate stocks also recorded unexpected builds, raising concerns over slowing fuel consumption ahead of the summer driving season.
“The EIA’s reported surprise stock builds will have a downward pressure particularly on WTI,” said Emril Jamil, senior analyst at LSEG Oil Research. “This may incentivize increased U.S. crude exports to Europe and Asia as domestic demand signals weaken.”
The data came as crude imports into the U.S. hit a six-week high, while gasoline and distillate demand dropped, compounding fears of an oversupplied domestic market.
On Wednesday, both Brent and WTI fell by 0.7% following the EIA release and ahead of fresh geopolitical developments.
Adding to market uncertainty, Oman’s foreign minister confirmed that a fifth round of nuclear negotiations between Iran and the United States is scheduled to take place in Rome on Friday.
The talks are expected to focus on reviving the 2015 nuclear agreement, which could eventually lead to the easing of sanctions on Iran and a potential increase in its oil exports.
Iran, currently the third-largest producer within the Organization of the Petroleum Exporting Countries (OPEC), remains under heavy U.S. sanctions that limit its crude export capacity.
A successful agreement could return additional Iranian barrels to the global market, weighing further on prices.
“Traders remain cautious, avoiding large positions as they assess conflicting signals over U.S.-Iran nuclear talks and a media report of potential Israeli strikes on Iranian nuclear facilities,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment.
Earlier in the week, CNN reported that U.S. intelligence suggested Israel may be preparing to target Iranian nuclear sites, although no final decision had been made.
The report temporarily lifted oil prices due to fears of potential supply disruption, but gains were short-lived amid confirmation of the planned U.S.-Iran diplomatic engagement.
Analysts say geopolitical risk remains a key variable for oil markets, particularly in the Middle East where tensions between Israel and Iran could trigger regional instability and threaten crude flows.
However, the possibility of additional Iranian supply through a revived nuclear deal is currently outweighing short-term geopolitical fears.
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that broader concerns about Russian oil exports also linger in the background.
“Ukraine has indicated it will push the European Union for stricter sanctions, including the seizure of Russian assets and targeting certain buyers of Russian crude,” she said.
Oil markets are now closely monitoring the outcome of the U.S.-Iran talks, upcoming OPEC production guidance, and U.S. demand signals as the Memorial Day weekend approaches, marking the start of peak summer travel.
“With rising inventories and geopolitical ambiguity, traders are hesitant to take definitive directional bets,” Kikukawa added.
As of press time, market sentiment remains mixed, driven by near-term bearish supply data and longer-term uncertainty around Iranian oil re-entry and broader Middle East risk factors.
