Oil price turns negative in response to Ukraine uncertainty

© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant

By Laura Sanicola

(Reuters) -Oil prices turned negative on Wednesday, after rising earlier on reports that Ukraine's government, foreign ministry and state security service were affected by a cyberattack.

Brent crude fell 11, or 0.3%, to $91.80 a barrel at 1:05 p.m. EDT (1805 GMT), after hitting $99.50 on Tuesday, the highest since September 2014.

U.S. West Texas Intermediate (WTI) crude futures fell 11 cents, or 0.1%, to $92.20 a barrel, after reaching $96 on Tuesday.

"The market is becoming more weary and gains made after the cyber attack did not hold...the calculus is too difficult to get overly concerned," John Kilduff, partner at Again Capital LLC in New York, said.

Moscow denies planning an invasion and has described warnings as anti-Russian hysteria. But it has taken no steps to withdraw the troops deployed along Ukraine's frontiers.

U.S. stocks slipped on Wednesday after giving up all of the opening gains as reports of cyberattacks on several Ukrainian state websites added to fears.

Ukraine declared a state of emergency on Wednesday and told its citizens in Russia to flee, while Moscow began evacuating its Kyiv embassy.

Oil prices rose on Tuesday on fears that sanctions imposed by Western nations on Russia, after it sent troops into two breakaway regions in eastern Ukraine, could hit energy supplies.

Sanctions imposed by the United States, the European Union, Britain, Australia, Canada and Japan were focused on Russian banks and elites, while Germany halted certification of a gas pipeline from Russia.

But the United States made it clear that sanctions agreed and those which may be imposed will not target oil and gas flows.

However, analysts expect oil prices to continue seeing support from the Russia-Ukraine crisis, with some Western countries promising more sanctions if Russia launches a full invasion.

"The prospect of more conflict in Ukraine should safeguard the geopolitical risk premium," said Stephen Brennock at brokerage PVM Oil.

"There is a risk that Russia will retaliate to the sanctions by reducing deliveries of its own accord," Commerzbank (DE:CBKG) analyst Carsten Fritsch said.

The potential return of more Iranian crude to the market weighed on prices, as Tehran and world powers inch closer to reviving a nuclear agreement.

"Nuclear talks in Vienna are reaching a sensitive and important point," Iran's foreign minister Hossein Amirabdollahian said on Wednesday.

Yet analysts say there is little chance of Iranian crude returning to the market in the immediate future to ease current supply tightness.

"If a U.S.-Iran deal is reached, it will ease some of the pressure but not enough to stop oil prices inching towards triple digits," Pratibha Thaker of the Economist Intelligence Unit said.