By Barani Krishnan
Investing.com -- Iran or Russia? Make your pick.
Oil traders went broadly for the first of the two factors in Thursday’s trade, sending crude prices down 2% on the prospect that Tehran could soon resume its nuclear pact with world powers and rescind U.S. sanctions that could legitimately return a million new Iranian barrels or more to the world market.
But oil’s losses on the day were still limited by escalating Russia-Ukraine tensions, which reached fever-pitch on Thursday on reports of shelling in Eastern Ukraine which were not necessarily related to the conflict between the two sides, said those in the know.
Away from the stand-off point at Ukraine’s borders, Russia continued to engage in a verbal war with the United States and Western allies of Ukraine, which it accused of aggravating the conflict. Washington and its NATO partners, meanwhile, accused Moscow of just waiting for the right moment to invade Ukraine and creating all sorts of pretexts to achieve that.
“There are just so many unknowns in the Russian-Ukraine stand-off that each trade might not last beyond the next headline,” said John Kilduff, partner at New York energy hedge fund Again Capital. “Given this extremely challenging circumstances and volatility, traders have opted to keep a limited risk upside on oil — i.e. $90 support — while focusing on the ‘now’ in the trade, which is the possibility of the Iran deal.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down $1.90, or 2%, at $91.76.
London-traded Brent, the global benchmark for oil, settled down $1.84, or 1.9%, at $92.97.
Reuters, reporting on a draft it obtained on the tentative Iranian deal, said there would be various phases to bring Tehran back into compliance with its 2015 nuclear agreement with world powers.
It also said some $7 billion in Iranian funds stuck in South Korean banks under U.S. sanctions could be unfrozen first, before the sanctions themselves are removed, allowing Iran to freely trade its oil but with continued surveillance of its nuclear capabilities.
No timelines had been drawn yet for any of these, though the need for a deal was urgent, Reuters said.