LONDON: Oil eased on Monday from its highest in more than seven years as Ukraine hinted at possible concessions to Russia that could alleviate tensions between the two countries that Western governments say are on the brink of war.
Brent crude was down 60 cents, or 0.6 percent, at $93.84 a barrel by 1440 GMT after touching its highest since October 2014 at $96.16. US West Texas Intermediate (WTI) crude fell 47 cents, or 0.5 percent, to $92.63 after hitting $94.94, the loftiest since September 2014.
“Market participants are concerned that a conflict between Russia and Ukraine could disrupt supply,” said UBS commodities analyst Giovanni Staunovo. He said the oil market is sensitive to any news of potential supply disruptions because oil inventories are low and producers’ spare capacity is expected to fall further.
Comments from the United States about an imminent attack by Russia on Ukraine have rattled global financial markets. Russia could invade Ukraine at any time and might create a surprise pretext for an attack, the United States said on Sunday. Moscow denies that it plans to invade and has accused the West of hysteria.
However, markets later cooled as Ukrainian Ambassador Vadym Prystaiko said Ukraine was prepared to make some concessions to Russia. “If Russia invades Ukraine, crude oil and natural gas prices can be expected to surge significantly. In this case, Brent would probably exceed $100 per barrel,” said Commerzbank analyst Carsten Fritsch.
Supplies have been stretched as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, have struggled to deliver monthly pledges to increase output by 400,000 barrels per day (bpd) until March.
“Oil prices are once again coming under tremendous upward pressure as OPEC+ missed its output targets by a high 900,000 barrels in January,” said Pratibha Thaker, the Economist Intelligence Unit’s editorial director for the Middle East and Africa.
International Energy Agency (IEA) chief Fatih Birol on Monday urged OPEC+ to close the gap between its words and its actions. Investors are also watching talks between the United States and Iran to revive the 2015 nuclear deal.
The Iranian foreign minister on Monday said that Iran was “in a hurry” to reach a swift agreement with world powers in nuclear talks in Vienna, provided its national interests are protected. “A nuclear deal between the United States and Iran could release 1.3 million barrels of supply, but this will not be sufficient to ease the supply constraints,” said Thaker.
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