New York : Oil prices fell more than 6% on Tuesday to their lowest level in nearly three weeks, as Russia suggested it would allow the Iran nuclear deal to resume and as traders worry China The growing pandemic lockdown in the U.S. may dent demand.
Brent and both US crude futures The benchmark fell below $100 a barrel for the first time since late February. Brent is down around $40 and WTI over $30 since hitting a 14-year high on March 7. Trade has been extremely volatile since Russia invaded Ukraine more than two weeks ago.
Brent futures fell $6.99, or 6.5%, to $99.91 a barrel during the session. US West Texas Intermediate (WTI) crude fell $6.57, or 6.4%, to $96.44 a barrel. Brent fell to $97.44 and WTI settled at $93.53, the lowest since February 25.
On the technical charts, both contracts moved closest to the oversold area since December. At the beginning of March they were in an overbought position. Brent was once above $139 a barrel.
Russia is the world’s largest exporter of crude oil and fuel. Many buyers have given up on Russian barrels since the invasion, fearing a disruption in the supply of millions of barrels of daily crude. Those fears are over now.
A Ukrainian negotiator said on Tuesday that talks are on with Russia on a ceasefire and the withdrawal of Russian troops from Ukraine. The ensuing selloff pushed the price lower, but many expect the volatility to continue.
“While reports of promising talks are to be welcomed, it is difficult to see how at this stage the two sides would be prepared to make concessions acceptable to either party,” a research note from Kepler said. “In this current situation, it is difficult to see how crude oil prices are not going down.”
Also on Tuesday, Russia said it had given written guarantees that it could do its job as a party to the Iran nuclear deal, suggesting Moscow would allow the 2015 deal to resume.
Talks to revive the nuclear deal could lift sanctions on Iran’s oil sector and allow Tehran to resume crude exports. They were stopped because of Russian demands.
Western sanctions have failed to prevent China and India from buying Russian crude as a result of Russia’s invasion, which it calls a “special operation”.
The Organization of the Petroleum Exporting Countries said oil demand in 2022 faced challenges from aggression and rising inflation as crude prices rise, raising the possibility of a fall in its forecast for stronger demand this year.
China saw a huge jump in daily COVID-19 infections, which could slow the current pace of consumption as that nation goes into lockdown.
Lewis Dixon, senior oil market analyst at Rystad Energy, said: “It has been estimated that a severe lockdown in China could jeopardize oil consumption by 0.5 million bpd, fueled by fuel shortages caused by increased energy prices.” will increase further.”
The US Federal Reserve is widely expected to raise interest rates by 25 basis points on Wednesday for the first time in four years to fight rising inflation. This could strengthen the US dollar and reduce demand for oil and other commodities priced in the greenback.
Preliminary data from the American Petroleum Institute showed US crude inventories rose by 3.8 million barrels for the week ended March 11, while gasoline inventories declined by 3.8 million barrels and distillate stocks rose by 888,000 barrels, according to sources. Barrel grew, who spoke on condition of anonymity.
Official US government inventory data is due on Wednesday.
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