Oil price benchmarks drop below $100, for the first time in weeks

NEW YORK (Reuters) – Oil prices fell more than 6 percent on Tuesday to their lowest in nearly three weeks, as Russia suggested it would allow the revival of the Iran nuclear deal to move forward and as traders worried about a deepening pandemic shutdown in New York. China could weaken demand.

Brent and US crude futures settled below $100 a barrel for the first time since late February. Since hitting a 14-year high on March 7, Brent has fallen by nearly $40 and WTI by more than $30. Trade has been very volatile since Russia invaded Ukraine more than two weeks ago.

During the session, Brent crude futures fell $6.99, or 6.5%, to settle at $99.91 a barrel. US West Texas Intermediate crude fell $6.57, or 6.4 percent, to settle at $96.44 a barrel. Brent fell to $97.44, and West Texas Intermediate crude reached $93.53, its lowest level since February 25.

On the technical charts, both contracts have moved near the oversold territory since December. It was in overbought conditions during early March. Brent once topped $139 a barrel.

Russia is the largest exporter of oil and fuel in the world. Many buyers have avoided production of Russian barrels since the invasion, raising fears that millions of barrels could be disrupted from the daily crude supply. These concerns now seem exaggerated.

A Ukrainian negotiator said on Tuesday that talks with Russia on a ceasefire and the withdrawal of Russian forces from Ukraine were continuing. The selling that followed sent prices lower but many expect volatility to continue.

“While reports of promising talks are welcomed, it is difficult to see how either side would be prepared at this point to make concessions that would be acceptable to either side,” said a research note from Kepler. “In this current situation, it is difficult to see how crude oil prices are not underestimated.”

Also on Tuesday, Russia said it had written guarantees that it could do its job as a party to the Iran nuclear deal, suggesting that Moscow would allow the revival of the shattered 2015 deal to move forward. Read more

Talks to revive the nuclear deal could lift sanctions on Iran’s oil sector and allow Tehran to resume crude exports. They were stopped due to Russian demands. Read more

In the fallout from the Russian invasion, which it calls a “special operation,” Western sanctions have failed to deter China and India from buying Russian crude. Read more

The Organization of the Petroleum Exporting Countries (OPEC) said that oil demand in 2022 was challenged by the invasion and rising inflation as crude prices rose, raising the possibility of lowering its forecast for strong demand this year. Read more

China has seen a huge jump in daily COVID-19 infections, which could slow the current pace of consumption as that country turns into lockdown. Read more

“The severe shutdown in China is estimated to put at risk 0.5 million barrels per day of oil consumption, which will be further complicated by fuel shortages due to energy price inflation,” said Louise Dixon, senior oil market analyst at Rystad Energy.

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 combat spiraling inflation. This could strengthen the US dollar and weaken the demand for oil and other commodities priced in dollars.

Preliminary data from the American Petroleum Institute showed that US crude stocks rose by 3.8 million barrels for the week ending March 11, while gasoline stocks fell by 3.8 million barrels and distillate stocks rose by 888,000 barrels, according to sources who spoke on condition of anonymity.

Official US government inventory data is due on Wednesday.

(Covering by Stephanie Kelly in New York). Additional reporting by Rowena Edwards in London and Yuka Obayashi in Tokyo. Editing by Margarita Choi, David Goodman, Mark Porter and David Gregorio

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