LONDON -Oil prices tumbled to their lowest levels in almost three weeks on Tuesday as supply disruption fears eased and as surging COVID-19 cases in China spurred demand concerns.
Brent futures were down $6.40, or 5.9%, to $100.50 a barrel at 1308 GMT, while U.S. West Texas Intermediate (WTI) crude was down $6.35, or 6.1%, to $96.66 a barrel.
Brent fell as low as $97.44 and WTI hit $93.54, their lowest levels since Feb. 25.
The steep decline followed a statement from Russian Foreign Minister Sergei Lavrov that Moscow is in favour of the 2015 Iran nuclear deal resuming as soon as possible.
The talks to revive the nuclear accord, which would lead to sanctions on Iran’s oil sector being lifted and allow Tehran to resume crude exports, had recently stalled due to Russian demands.
Prices extended their losses from the previous day’s 5% decline after a steep jump in daily COVID-19 infections in China.
On Tuesday talks between Ukrainian and Russian negotiators were expected to continue on Tuesday.
Meanwhile, Western sanctions against Russia have failed to deter China and India from buying Russian crude.
Also, the market expects the U.S. Federal Reserve’s Open Market Committee to increase interest rates for the first time in four years, which could boost the U.S. dollar and hurt commodity prices.
This could “send equity and commodity prices further south,” PVM Oil analyst Tamas Varga said.
Brent has lost almost $40 since 14-year highs reached on March 7, while WTI has fallen by more than $30.
However, Tuesday’s steep price decline surprised several analysts.
“With the fundamental situation hardly changed, and with the tensions and uncertainties around the war in Ukraine still high, it is puzzling to witness the risk premium evaporate so swiftly,” Julius Baer analyst Norbert Rücker said.
In addition to the Russia-Ukraine crisis, spare crude production capacity remains limited from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
“As the oil market tightness persists through the medium term, we believe the elevated risk premium in oil prices will remain,” JPMorgan said on Tuesday.
