Photo caption: Oil
*US-Iran talks could prevent conflict and supply disruption
*Deal with US hinges on diplomacy, Iranian minister says
*US oil stocks rise and gasoline inventories fall, API data shows
Oil prices held near seven-month highs on Wednesday as investors weighed up the threat to oil supply from potential military conflict between the U.S. and Iran.
Brent futures were up 63 cents at $71.40 a barrel at 1307 GMT. WTI futures gained 56 cents to $66.19.
Brent prices reached their highest since July 31 on Friday while WTI hit its highest since August 4 on Monday, as the U.S. positioned military forces in the Middle East to try to compel Iran to negotiate an end to its nuclear and ballistic missile programme.
An extended conflict could disrupt supplies from Iran, the third-biggest crude producer in the Organization of the Petroleum Exporting Countries, and other countries in the key Middle East producing region.
Supporting oil prices, U.S. President Donald Trump briefly laid out his case for a possible attack on Iran in his State of the Union speech on Tuesday, saying he would not allow a country he described as the world’s biggest sponsor of terrorism to have a nuclear weapon.
“The market is trying to get a sense of what’s happening between the U.S. and Iran,” said SEB commodities analyst Ole Hvalbye. “If we did not have any sort of escalation or harsh rhetoric between the U.S. and Iran, (Brent) oil prices would probably trade between $60 and $65 per barrel.”
U.S. envoys Steve Witkoff and Jared Kushner are due to meet an Iranian delegation for a third round of talks on Thursday in Geneva.
Iranian Foreign Minister Abbas Araqchi said on Tuesday that a deal with the U.S. was “within reach, but only if diplomacy is given priority”.
“Trump has warned that without a deal, there will be ‘very bad consequences’. Whether (Iran’s) concessions will meet the U.S.’s ‘zero enrichment’ red line remains to be seen,” IG market analyst Tony Sycamore said in a note.
Amid the heightened tensions, Iran has accelerated talks to purchase Chinese anti-ship cruise missiles, according to sources, which could target U.S. naval forces that have assembled near the Iranian coast.
While geopolitical tensions have supported prices, the market is also contending with concerns over large inventory gains as global supply exceeds demand.
According to market sources, the American Petroleum Institute late on Tuesday reported a massive increase in U.S. oil stockpiles of 11.43 million barrels in the week ended February 20.
Official U.S. oil inventory reports from the Energy Information Administration are due later on Wednesday.
=== Reuters ===
