Brent oil prices were largely stable today, as investors braced for nuclear talks between Iran and the US, and trilateral US-Ukraine-Russia peace talks, both taking place in Geneva.
Brent crude futures were down 10 cents, or 0.15%, at $68.55 a barrel this afternoon after a 1.33% gain yesterday.
US West Texas Intermediate crude was at $63.58 a barrel, up 69 cents, or 1.1%, but the move included all of yesterday's price action as the contract did not have a settlement that day due to the Presidents Day holiday in the US.
Many Asian markets were closed today for Lunar New Year holidays, including mainland China, Hong Kong, Taiwan, South Korea and Singapore.
Investors are watching US-Iran relations as any escalation or conflict could lead to Iran closing the Strait of Hormuz, a crucial oil export route, which would severely impact global oil exports.
Russia-Ukraine peace talks are also in focus because any peace resolution could see a lifting of sanctions, bringing Russian oil back to the mainstream market.
"Market sentiment is closely tied to the tone and progress of these negotiations, sustaining a geopolitical risk premium in prices," said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
Oil prices are therefore likely to stay volatile, with sharp two-way swings driven by diplomatic signals rather than pure demand-supply fundamentals, Sachdeva added.
Washington and Tehran began indirect talks in Geneva today focusing on their long-running nuclear dispute amid a US military buildup in the Middle East. Iran's supreme leader warned today any US attempt to depose his government would fail.
Iran will close parts of the Strait of Hormuz for a few hours today due to "security precautions" for shipping safety, the semi-official Fars news agency reported, as the Revolutionary Guards conduct military drills in the waterway.
"Both sides are under pressure to reach an agreement in order to avoid military escalation," Commerzbank analysts said in a note.
Also in Geneva today, Ukrainian and Russian officials are set to meet for a new round of US-brokered peace talks, which the Kremlin said would likely focus on territory, the main sticking point.
Ukrainian attacks on Russian energy infrastructure continue. The Ukrainian military said today that it had struck the Ilsky refinery, while a drone attack was also reported at the port of Taman.
Elsewhere, oil production at Kazakhstan's giant Tengiz oil field is gradually increasing after an outage in January, Russian news agency Interfax reported.
