Oil extends decline with geopolitical tensions seen easing

Oil fell sharply as traders weighed the risks to the market’s recent rally, including a potential de-escalation in tension over Ukraine and the resumption of Iran nuclear talks.

Oil fell sharply as traders weighed the risks to the market’s recent rally, including a potential de-escalation in tension over Ukraine and the resumption of Iran nuclear talks. 

Futures in New York declined as much as 2.5 per cent. French President Emmanuel Macron said that he got assurances from his Russian counterpart Vladimir Putin that there would be no “escalation.” He didn’t elaborate. The crisis had contributed to surging prices of oil and natural gas, as well as some metals, in recent weeks after Western nations had warned of a possible invasion. Russia has repeatedly denied any such plans.      

Oil’s drop on Tuesday also came after Russia’s chief nuclear negotiator Mikhail Ulyanov told the Moscow newspaper Kommersant that talks to revive the Iranian nuclear accord are at the finish line with a final document on the table. 

The possibility of more Iranian oil comes just as global supply has increasingly been unable to keep up with surging demand with economies emerging from the pandemic. OPEC+ is struggling to meet its pledged output increases, in part due to outages in Libya, while traders are looking to see how much the U.S. shale patch will lift output this year.

That’s strengthened the market dramatically over the past few months, and put US$100 a barrel within reach. The physical market has also rallied, with benchmark Dated Brent in the North Sea assessed by S&P Global Platts at more than US$98 a barrel on Monday, traders said. 

“There’s a lot of uncertainty,” BP Plc Chief Executive Officer Bernard Looney said in a Bloomberg TV interview. “We’ve got what’s going to happen with Iran, we’ve got what’s going to happen with the shale response in North America, we’ve got concerns in Libya.”