Oil drops 2% as talks with Iran offset Ukraine crisis
NEW YORK (Reuters) – Oil prices fell about 2% on Thursday as talks to resuscitate a nuclear deal with Iran entered their final stages, which could unlock more crude supplies, but losses were limited by tensions between the top energy exporter, Russia and the West over Ukraine. .
“(The) oil market is locked in a tug of war between Iranian sanctions relief and Russian-Ukrainian tensions,” said Stephen Brennock of brokerage PVM Oil.
Brent crude futures fell $1.91, or 2.0%, to $92.90 a barrel as of 1:34 p.m. EST (1834 GMT), while U.S. crude West Texas Intermediate (WTI ) fell $1.97, or 2.1%, to $91.69.
Both benchmarks hit their highest levels since September 2014 earlier in the week and both continue to face extreme pullback in the coming months, a market structure where fast contracts are more expensive than those for later dates, indicating tighter supply.
Brent and WTI futures through August were in what Robert Yawger, executive director of energy futures at Mizuho, called a “super discount,” with each month trading at the minus $1 a barrel below the previous month.
“The price could already be in triple-digit territory without the nuclear talks between the United States and Iran,” said Craig Erlam, market analyst at OANDA, noting “it could mean around 1.3 million barrels per day (bpd) of crude quickly”. re-enter the market.
The United States is “in the middle of the very last stages” of indirect talks with Iran, aimed at salvaging a 2015 agreement limiting Tehran’s nuclear activities, State Department spokesman Ned Price said on Wednesday.
With a new deal possibly on the horizon, South Korea said on Wednesday it had held talks on resuming imports of Iranian crude oil and unfreezing Iranian funds. South Korea was previously one of Tehran’s biggest oil buyers in Asia.
However, tension around a possible Russian invasion of Ukraine continued to support oil markets due to the potential disruption in energy supply. Russia denies planning to invade its neighbour.
US President Joe Biden said on Thursday that there was every indication that Russia was planning to invade Ukraine in the coming days and was preparing a pretext to justify it, after Ukrainian forces and pro-Moscow rebels exchanged fire in the eastern Ukraine.
(Additional reporting by Ahmad Ghaddar in London and Chen Aizhu in Singapore; Editing by Marguerita Choy, Mark Potter and Barbara Lewis)