Oil prices fell sharply on Thursday, reversing strong gains made earlier in Asian markets. Brent crude futures dropped 72 cents (1%) to $69.05 per barrel, while U.S. West Texas Intermediate (WTI) fell 65 cents (nearly 1%) to $67.50 per barrel.
This came after both benchmarks surged over 4% the previous day, reaching their highest levels since early April.
US Pulls Personnel from Middle East Amid Rising Tensions
The price retreat followed the U.S. decision to withdraw personnel from the Middle East as tensions rose ahead of planned talks with Iran over its nuclear activities.
President Donald Trump said the withdrawal was due to the region’s danger and reaffirmed the U.S. stance against Iran acquiring nuclear weapons. Iran insists its nuclear program is peaceful.
Heightened tensions have increased concerns about possible oil supply disruptions. The U.S. and Iran are scheduled to hold nuclear talks on Sunday.
Analysts See Price Correction but Continued Geopolitical Risks
Vivek Dar, head of mining and energy commodity research at Commonwealth Bank of Australia, called the recent spike in Brent crude prices above $70 a barrel “somewhat excessive.” He noted that the U.S. has not specified a concrete threat from Iran.
Dar said, “The price pullback is justified,” but the geopolitical premium keeping prices above $65 is likely to persist until the US-Iran talks clarify the situation.
US Embassy Evacuations Signal Increased Security Risks
Reuters reported that the U.S. is preparing a partial evacuation of its embassy in Iraq due to escalating risks. Iraq is the second-largest crude oil producer in OPEC after Saudi Arabia. Military families in Bahrain are also being allowed to leave.
Market Reaction and Technical Factors
Kelvin Wong, senior market analyst at OANDA, explained that oil prices weakened after hitting key technical resistance during Wednesday’s rally. Some investors are betting that Sunday’s meeting between the U.S. and Iran could ease tensions.
President Trump has warned that the U.S. would use military force against Iran if the talks fail.
Iranian Warning of Retaliation
Iranian Defense Minister Aziz Nasirzadeh warned that Iran would target U.S. bases in the region if negotiations fail and conflict is provoked.
Upcoming US-Iran Nuclear Talks
U.S. envoy Steve Witkoff is scheduled to meet Iranian Foreign Minister Abbas Araghchi in Oman on Sunday to discuss Iran’s response to the U.S. nuclear proposal.
US Crude Inventories Drop Sharply
Adding to market dynamics, the U.S. Energy Information Administration (EIA) reported a 3.6 million barrel decline in U.S. crude oil inventories last week to 432.4 million barrels, exceeding analyst expectations of a 2 million barrel drop.
