Oil dropped the most since Black Friday in November when omicron spooked the market after Russia said some troops are starting to return to their permanent bases.
Futures in New York fell close to $5 a barrel, the most since November 30, after touching $95 on Monday. Crude has swung wildly this week amid a flurry of reports about the tensions over Ukraine. While the U.S. had earlier warned an invasion may be imminent, President Vladimir Putin said talks with German Chancellor Olaf Scholz were businesslike and could be the basis of further discussions. Moscow has repeatedly denied it plans to attack.
Still, NATO Secretary General Jens Stoltenberg said it was yet to see any signs of a reduced Russian presence along the border with Ukraine. The market is holding on to every word in the standoff, with everything from natural gas and metals to global equities reacting to Russia’s comments about the pullback of troops on Tuesday.
“Profit-taking with oil was inevitable after Russia’s Defense Ministry stated that some troops are starting to return to their regular bases after completing drills,” said Ed Moya, Oanda’s senior market analyst for the Americas. “The Ukraine situation still remains tense and oil prices could swing $10 in either direction.”
The underlying oil market is one of the strongest in years. S&P Global Platts assessed the Dated Brent price, which values more than half of the world’s crude, at more than $99 a barrel on Monday, traders said. Gauges of market strength along the futures curve are trading at some of their firmest levels on record as supply struggles to keep pace with booming demand.
- WTI for March delivery fell $3.54 to $91.92 a barrel at 12:41 p.m. in New York
- Brent for April was dropped $3.24 to $93.24 a barrel
Falling stockpiles have been a major driver of recent gains, and later Tuesday the industry-funded American Petroleum Institute will issue estimates for changes in U.S. holdings. Inventories at the key storage hub at Cushing, Oklahoma, have sunk for the past five weeks, according to government data.
Still in the U.S., producers are ramping up supplies to take advantage of higher prices. Production from America’s Permian Basin rose to a record for a third month in a row in January, topping 5 million barrels a day, according to data from the Energy Information Administration.
- Negotiations between Iran and world powers appear to be moving toward an agreement that would allow the restart of 500,000 barrels a day in April-May, Citigroup Inc said in a report.
- The European Union’s top diplomat, Josep Borrell, said that he strongly believed a nuclear accord with Iran was “in sight”.
OPEC is focused on keeping the market well supplied, even as it grapples with underinvestment, according to its top official.