Oil rises on falling US stockpiles but Iran talks weigh

Oil prices rose on Thursday after rallying on an unexpected drop in US crude inventories in the previous session, as investors awaited the outcome of US-Iran nuclear talks that could add crude supplies quickly to global markets.

Brent crude futures rose $0.65, or 0.7%, to $92.20 a barrel at 1140 GMT, while US West Texas Intermediate crude was at $90.64 a barrel, up $0.98, or 1.1%.

Robust demand recovery from the coronavirus pandemic has kept global oil supplies snug, with inventories at key fuel hubs globally hovering at multi-year lows.  

US crude inventories fell 4.8 million barrels in the week to February 4, dropping to 410.4 million barrels - their lowest for commercial inventories since October 2018, the Energy Information Administration said. Analysts in a Reuters poll had forecast a 369,000-barrel rise.  

US product supplied - the best proxy for demand - peaked at 21.9 million barrels per day (bpd) over the past four weeks due to strong economic activity nationwide, EIA data showed.

"We are seeing some consolidation after a fairly constructive EIA report," said Warren Patterson, ING's head of commodities research.

However, investors are closely watching the outcome of US-Iran nuclear talks which resumed this week. A deal could lift US sanctions on Iranian oil and ease global supply tightness.

The White House publicly pressured Iran on Wednesday to revive the 2015 Iran nuclear agreement quickly, saying that it will be impossible to return to the accord if a deal is not struck within weeks.  

"The core uncertainty remains whether Iran is willing to sign on the dotted line," Eurasia analyst Henry Rome said, adding that the consultancy was holding onto a 40% call on a return to the agreement.

"Any quick deal would likely put some further downward pressure on prices, as it would help alleviate some concerns over the lack of spare OPEC capacity," he added.