Oil prices fell more than 6 percent on Tuesday, reaching their lowest point from over three weeks, after Russia warned it would allow the Iran nuclear agreement to be renewed, and traders were concerned that China’s pandemic lockdowns would stifle demand.
The Brent and US crude both indexes dipped below $100 each barrel for the first time since three weeks. Brent has lost about $40 and WTI has lost upwards of $30 after hitting 14-year peaks on March 7. As Russia attacked Ukraine more than 2 weeks ago, trading has been exceedingly turbulent.
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Brent futures fell $6.99, or 6.5 percent, during the day to settle at $99.91 a barrel. In the United States, the cost of WTI oil fell $6.54, or 6.2 percent, to $96.41 each barrel. Brent plummeted as low as $97.44 a barrel, while WTI sank to $93.53 a barrel, its lowest levels since February 25.
Both contracts have come the nearest to overbought territory on technical charts since December. Early in March, they were in overbought conditions. Brent reached a high of $139 per barrel at one time.
Russia is the world’s top crude and fuel exporter, many consumers have avoided Russian barrels due to the invasion, increasing worries about a breakdown of millions of barrels of everyday oil sales. Those fears now appear to be exaggerated.
A Ukrainian official said on Tuesday that discussions with Russia over peace and Russian military withdrawal from Ukraine are still proceeding. Prices fell as a result of the subsequent sell-off, but many people expect instability to continue.
On Tuesday, Russia said it has written assurances that it will be able to carry out its obligations as a participant in the Iran nuclear agreement, implying that Moscow will allow the shattered 2015 pact to be resurrected.
The efforts to resurrect the nuclear agreement may result in the relaxation of sanctions against Iran’s oil sector, allowing Tehran to resume petroleum exports. They had come to a halt due to Russian demands.
Sanctions imposed have failed to discourage China and India from purchasing Russian crude as a result of Russia’s invasion, which it terms a “special operation.”
OPEC warns of a threat to oil demand from the Ukraine conflict and inflation
Oil consumption in 2022 will be challenged by the invasion and growing inflation as crude prices rise, increasing the risk of cutbacks to the Organization of Petroleum Exporting Countries'(OPEC) prediction for solid demand this year.
China has seen a sharp increase in daily COVID-19 infections, which could impede consumption as the country transitions to lockdowns.
To combat surging inflation, the US Federal Reserve is generally expected to raise interest rates by 25 basis points on Wednesday for the first time in four years. This might increase the US currency, lowering demand for oil and other greenback-denominated commodities.
According to sources, initial studies from the American Petroleum Institute showed that crude inventories in the United States increased by 3.8 million barrels for the week ending March 11, while gasoline stockpiles decreased by 3.8 million barrels and distillate stock prices increased by 888,000 barrels.