Oil prices are down at the start of the London session today, in what many are calling profit-taking as it became clear the first wave of U.S. and European sanctions on Russia for sending troops into eastern Ukraine would not disrupt oil supplies.
Also weighing in on the prices of both benchmarks is the possibility of Iranian oil coming back into the market. Sources have it that Tehran and world powers are close to reviving a nuclear agreement which ultimately means more crude oil supply amidst rising crude demand.
The global benchmark, the Brent crude is down 0.31%, currently trading $93.56 a barrel, after soaring as high as $99.50 on Tuesday, the highest since September 2014, nearly hitting the $100 per barrel mark, which many analyst and big banks have been forecasting. The United States’ benchmark, the West Texas Intermediate (WTI) crude futures is also down 0.17%, currently trading at $91.75 a barrel, after hitting a high of $96 on Tuesday.
What you should know
Prices of the black liquid rallied significantly yesterday on worries that western sanctions on Russia for sending troops into two breakaway regions in eastern Ukraine could hit energy supplies, but the United States made it clear there would be no impact on energy exports.
A senior U.S. State Department official told reporters late on Tuesday that “the sanctions that are being imposed today as well that could be imposed in the near future are not targeting and will not target oil and gas flows.”
Russia had sanctions imposed by a number of countries including the United States, the European Union, Britain, Australia, Canada and Japan yesterday and these sanctions were focused on Russian banks and elites while Germany halted a major gas pipeline project from Russia.
Further dampening prices is the possible return of more than 1 million barrels per day of crude from Iran, as diplomats said Iran and world powers were on the verge of reaching an agreement to curb Tehran’s nuclear programme.
Commonwealth Bank commodities analyst, Vivek Dhar explained that the big unknown is how quickly Iran could actually boost its exports. He further stated that other members of the Organization of Petroleum Exporting Countries and its allies (OPEC+), have struggled to meet their production targets due to underinvestment in oil infrastructure, and Iran could face the same issue.
Vandana Hari, founder of oil market analysis provider Vanda Insights stated, “The NATO allies are holding back some punitive measures as bargaining chips, which also means the door to diplomacy is still open. The Iran nuclear deal remains a possibility until it is not. The two factors will leave crude rangebound and hold Brent back from $100 for the time being.”
