Oil posted its first weekly loss in two months as traders weighed heightened geopolitical tensions over Ukraine against the potential for Iranian barrels to be added to the market.
West Texas Intermediate (WTI) for March delivery closed down 0.7 percent at US$91.07 a barrel on Friday.
US crude fell 2.2 percent this week, fluctuating as prices of commodities from gas to metals and food swung with every twist and turn in the standoff between the West and Russia.
Brent crude for April delivery on Friday rose 0.6 percent to US$93.54 a barrel, down 0.95 percent weekly.
While the US ramped up warnings of a possible Russian attack on Ukraine, Russian officials continued to reiterate that no invasion was under way and none was planned.
US Secretary of State Antony Blinken and Russian Minister of Foreign Affairs Sergei Lavrov have agreed to meet for talks next week.
Even with its most recent leg higher, oil’s recent rally has shown signs of cooling.
The North Sea market has seen differentials for physical barrels ease, while refining margins have come under pressure. One oil-focused exchange-traded fund saw its biggest daily withdrawal since July 2020.
Additionally, mounting speculation that Iran’s nuclear deal might be revived is damping some of the bullish signals. The deal could pave the way for the removal of US sanctions on the nation’s crude exports, adding much-needed supply to the market.
WTI’s prompt spread — the difference between its nearest two contracts — dropped to US$0.86, down sharply from its US$2 premium earlier this week. The narrower spread signals that traders expect supplies to be somewhat less tight next month amid muted exports. March crude futures expire on Tuesday.
Crude rose to the highest since 2014 this week in a blistering rally underpinned by roaring demand, constrained supply and declining inventories.
The underlying market is one of the strongest its been in years, and Dated Brent, a more immediate measurement of oil prices, hit US$100 a barrel.
While the market remains strong, prices have weakened as the geopolitical risk premium has declined in the past few days.
“It doesn’t matter how tight the oil market is right now, energy traders are taking risk off the table,” Oanda Corp senior market analyst Ed Moya said. “In addition to the Ukraine situation, Iran nuclear talks continue to head in the right direction, potentially paving the way for more barrels of crude to hit the oil market later this year.”
Issues surrounding Iran’s nuclear accord are set to be discussed at a key transatlantic security meeting in Munich, Germany, this weekend.
Additional reporting by staff writer
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