Morning Highlights: Oil Jumps 2% as U.S.-Iran Talks Stall on Zero Enrichment; Saudi Arabia and Abu Dhabi Ramp Supply Ahead of OPEC+ Meeting

Friday, February 27, 2026

MARKET SNAPSHOT

Oil surged as traders remained on alert for potential supply disruptions after Thursday's U.S.-Iran nuclear talks extended without resolution. Brent crude rose $1.47 (2%) to $72.22/bbl. WTI gained $1.55 (2.25%) to $66.76/bbl. Prices jumped over a dollar during Thursday's talks on reports that discussions had stalled over U.S. insistence on zero uranium enrichment, then eased slightly after Oman's mediator said the two sides had made progress.

The talks didn't break down but didn't produce a deal either. Technical-level discussions are scheduled to resume next week in Vienna. With Trump's 10-15 day deadline (set February 19) now running into early March, the window for diplomacy is narrowing rapidly. DBS analyst Suvro Sarkar captured it well: the latest round offers some hope for a peaceful resolution, but military strikes are in no way out of the equation.

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TOP DEVELOPMENTS

U.S.-Iran Talks Extended but Stall on Zero Enrichment

Thursday's indirect talks in Geneva produced no breakthrough, with discussions reportedly stalling on the core issue: U.S. insistence that Iran completely halt uranium enrichment. The Omani mediator said both sides made progress and announced technical-level talks will resume next week in Vienna.

This is the worst outcome for anyone hoping the premium would resolve quickly in either direction. No deal means the $8-10/bbl geopolitical premium (per DBS and ING) stays intact. No breakdown means we don't get the military escalation that would send Brent to $80+. Instead we get more talks, more uncertainty, and Trump's deadline clock ticking down. The zero enrichment demand remains the fundamental obstacle, exactly as it has been since talks began. Iran has adamantly refused to give up enrichment rights; the U.S. won't accept anything less. Moving to technical-level discussions in Vienna suggests they're trying to find creative middle ground, but the gap is enormous.

Saudi Arabia and Abu Dhabi Ramping Production and Exports

Saudi Arabia is increasing production and exports as a contingency plan for potential Iran supply disruption, two sources confirmed. Separately, Abu Dhabi's ADNOC is offering additional volumes of its flagship Murban crude to concession partners for April loading. Partners in ADNOC Onshore (BP, TotalEnergies, CNPC, Inpex, Zhenhua Oil, GS Energy) are entitled to about 40% of production at roughly 2 million bpd.

The Gulf producers are now actively adding supply from multiple directions simultaneously. Saudi ramping production, Abu Dhabi pushing extra Murban volumes, and OPEC+ likely to approve 137K bpd increase for April at Sunday's meeting. The additional Murban supply has already weighed on spot premiums, which slipped to less than $2/bbl to Dubai quotes for April cargoes. This is bearish supply being added into what Goldman already forecasts as a 2.3M bpd surplus, all while Brent trades above $72 on geopolitical premium alone.

OPEC+ Sunday Meeting: 137K BPD April Increase Expected

OPEC+ is likely to consider raising output by 137,000 bpd for April at its March 1 meeting, after suspending increases in Q1. The increase comes as Gulf producers take advantage of elevated prices driven by U.S.-Iran tensions and prepare for peak summer demand.

The timing is notable. OPEC+ is restarting output increases into a market where the EIA just reported the largest U.S. crude build in three years (16M barrels), North Sea physical differentials are weakening, and every major forecaster projects massive surplus. They're using the Iran premium as cover to bring barrels back. If the geopolitical premium fades and these barrels are already flowing, the downside accelerates.

Geopolitical Premium Now Estimated at $8-10/bbl

DBS analyst Sarkar quantified the current risk premium at $8-10/bbl on fears of Strait of Hormuz disruption, consistent with ING's $10/bbl estimate from yesterday. This implies fair value Brent around $62-64 without Iran risk, aligning with Goldman's $64 annual average forecast and Morgan Stanley's $62.50 Q2 target.

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BOTTOM LINE

Brent at $72.22 is the highest close of the week and up 15% year-to-date, but the price action masks a market that's increasingly fragile. Thursday's talks produced the muddled middle: enough progress to avoid a breakdown, not enough to produce a deal, and Trump's 10-15 day deadline (now roughly one week away) hanging over everything. The move to technical-level talks in Vienna next week suggests both sides want to keep talking, but the zero enrichment impasse is real and fundamental.

The supply side is where the story gets interesting. Saudi Arabia ramping production, Abu Dhabi pushing extra Murban volumes (already pressuring spot premiums below $2/bbl to Dubai), OPEC+ set to approve 137K bpd for April on Sunday, Iran tripling Kharg Island loadings to 3M+ bpd ahead of potential conflict. Every major producer in the Middle East is adding barrels right now, for different reasons but with the same result: more supply into an already oversupplied market. Layer on last week's 16M barrel U.S. crude build and weakening North Sea physical differentials, and the fundamental picture is as bearish as it's been all year.

The $8-10/bbl risk premium is doing all the heavy lifting. Strip it out and you're at $62-64 Brent, exactly where Goldman, Morgan Stanley, and the physical market say you should be. The question remains timing: Trump's deadline runs into early March, Sunday's OPEC+ meeting will confirm the April output increase, and Vienna technical talks next week will test whether the zero enrichment gap can be bridged. If a deal framework emerges in Vienna, the premium unwinds fast toward the mid-$60s. If talks collapse and Trump follows through, we're looking at $80+ with Strait of Hormuz disruption risk. Gulf producers are clearly preparing for the latter scenario while hoping for the former. Watch Sunday's OPEC+ decision and next week's Vienna talks. The clock is ticking.