By Zaheer Anwari, Co-Founder and CEO at The Revacy Fund
Oil prices retreated today amid US-Iran nuclear talks in Geneva. While hopes of a material breakthrough weigh on the market, the risks of a breakdown in negotiations remain present and could fuel new volatility and price increases. Any escalation could threaten flows through the Strait of Hormuz, especially as Washington keeps military pressure elevated and has expanded sanctions targeting networks linked to Iran’s oil trade.
However, the market is confronted with rising US inventories. After the API reported a significant crude buildup, the EIA confirmed a sharp rise of approximately 16 million barrels for the week ended February 20, fueling some concerns. Supply levels also remain a source of risk as expectations of an oversupply are still present. At the same time, Saudi Arabia has been boosting its exports, while OPEC+ meets on March 1 and is expected to consider a modest output increase of around 137,000 bpd in April. The latter could weigh on the market and could help alleviate the impact from geopolitical developments, if any.
From an internal portfolio perspective, we have no exposure to oil until we see a clear breakout from this long-term consolidation.