Oil prices fell to their lowest in nearly three weeks on Tuesday as supply disruption fears faded, and a spike in coronavirus cases in China raised demand concerns.
Brent crude "futures" fell $8.49, or 7.94%, to $98.41 a barrel, while US West Texas Intermediate (WTI) crude fell $8.61, or 8.36% to $94.48 a barrel.
Brent fell to $97.44, and WTI reached $93.54, its lowest since February 25.
The sharp decline followed a statement by Russian Foreign Minister Sergei Lavrov that Moscow supports the resumption of the 2015 Iran nuclear deal as soon as possible. Talks to revive the nuclear deal, which would lead to the lifting of sanctions on Iran's oil sector and allow Tehran to resume crude exports, have recently been stalled due to Russian demands.
Prices extended losses from the previous day's 5% drop after a sharp jump in daily COVID-19 infections in China. Talks are expected to continue on Tuesday between Ukrainian and Russian negotiators.
Meanwhile, Western sanctions against Russia have failed to deter China and India from buying Russian crude. Also, the market expects the US Federal Reserve's Open Market Committee to raise interest rates for the first time in four years, which could boost the US dollar and hurt commodity prices.
Brent has lost nearly $40 since its 14-year high on March 7, while WTI is down more than $30. However, Tuesday's sharp drop in prices surprised many analysts.
"With the underlying situation difficult to change, and with continuing tensions and uncertainties over the war in Ukraine, it is baffling to see the risk premium evaporate so quickly," said Norbert Rucker, analyst at Julius Baer.
In addition to the Russian-Ukrainian crisis, the spare production capacity of crude oil remains limited at the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+.
"As the oil market continues to tighten over the medium term, we believe the higher risk premium in oil prices will remain," JPMorgan said on Tuesday.
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