Oil steady as US stockpiles fall but Iran talks weigh

Overall, thin supplies of crude oil, low storage and global output that is nearing a maximum are all working to drive up prices, according to Mitsubishi UFJ Financial Group (MUFG).

"Oil markets remain extremely tight playing into our bullish thesis that the simultaneous deficit of depleting inventories, thinning spare capacity and structural underinvestments are blending towards extremely distressed levels".

U.S. crude inventories fell 4.8 million barrels in the week to Feb. 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.

U.S. 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.

However, investors are closely watching the outcome of U.S.-Iran nuclear talks which resumed this week. A deal could lift U.S. sanctions on Iranian oil and ease global supply tightness, with some analysts seeing signs of progress.

"A deal is far from guaranteed though and with the market so tight, crude will likely remain elevated. It has helped take some pressure off but as we saw yesterday, there's still plenty willing to buy into shallow dips," said Craig Erlam, senior market analyst at OANDA.

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.