Oil fluctuated as markets weighed Iran’s threats on Israeli nuclear sites against a stronger U.S. dollar.

West Texas Intermediate settled little changed below US$83 a barrel after swinging between gains and losses in nearly a $2 range, ultimately leaving crude near the three-week low it reached on Wednesday.

Geopolitical risks lingered, with Iran warning Israel against attacking its nuclear facilities, threatening to respond in kind if its atomic sites are targeted. At present, oil is carrying a premium of $5 to $10 a barrel because of geopolitical tensions, but futures may fall without escalation, Goldman Sachs Group Inc. said.

Still, crude’s recovery remains hampered by broader financial market sentiment as the U.S. dollar’s strength makes commodities priced in the currency more expensive. The fundamental picture also is cloudy, and futures dropped on Wednesday after U.S. crude inventories rose by 2.7 million barrels last week while fuel demand declined. 

Despite the recent dip, oil remains comfortably higher year to date as supply cuts by OPEC+ members underpin a market that’s been boosted by geopolitical risks in the Middle East and Russia. The run-up had ignited speculation that crude may regain $100 a barrel, although market metrics such as timespreads and parts of the diesel market are pointing to more amply supply conditions.

U.S. sanctions are also in focus. President Joe Biden’s administration has reimposed restrictions on Venezuelan oil, ending a six-month reprieve in a move that may hamper flows from the South American nation. At the same time, new sanctions on Iranian oil were included as part of a foreign aid package released by House Republicans that is slated for a floor vote later this week.

Prices:

• WTI for May delivery was little changed to settle at $82.73 a barrel in New York
• Brent for June settlement fell 0.2% to settle at $87.11 a barrel.