Profit taking from investors and reports of Russian troops pulling back from Ukraine’s borders has weighed down oil prices, easing a seven week rally which has brought both major benchmarks within reach of the $100 milestone.
Brent Crude has slipped 2.63 per cent to $93.94 per barrel, while WTI Crude has dipped 2.94 per cent to $92.65
This follows the two benchmarks hitting their highest level since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82.
The price of Brent Crude has risen 50 per cent in 2021, with the global recovery in demand from the COVID-19 pandemic straining supply.
The slump follows investors cashing in on soaring prices and the previous day’s rally, as global markets recorded staggering losses across developed economies.
Meanwhile, there are encouraging reports that some troops in Russia’s military districts adjacent to Ukraine are returning to bases.
Mike Owens, global sales trader at Saxo Markets suggested markets remain highly sensitive, with prices still historically high.
He said: “It should be noted that prices remain at elevated levels, and most are still higher than where they were last week.”
According to Russia’s Interfax news agency, the Russia’s defence ministry has announced that while large-scale drills across the country continued, some units of the Southern and Western military districts have completed their exercises and have started returning to base.
It is possible this could help de-escalate tension between Moscow and the West, with both US President Joe Biden and Prime Minister Boris Johnson telling reports yesterday that there is still room for diplomacy.
Markets had been rallying over fears of supply shortages and economic disruption caused by potential conflict in the region and subsequent sanctions.
Ricardo Evangelista, senior analyst, ActivTrades explained: “Tension between Russia and the West over the potential invasion of Ukraine, has been one of the main factors behind the recent increases in the price of the barrel, with traders pricing-in the increasing likelihood of an armed conflict and the sanctions on Russian energy that would follow.”
Tightening supplies and rebounding demand has been a general theme in the oil market over the past few months, with OPEC+ consistently missing output targets, while US inventories continue to show a drop in crude stocks.
The first of this week’s two reports from the American Petroleum Institute is due later today.
Investors are also watching talks between the United States and Iran on reviving its nuclear deal with world powers, which could potentially allow for higher Iranian oil exports and ease market prices.
According to Reuters, Russian Foreign Minister Sergei Lavrov spoke to his Iranian counterpart Hossein Amirabdollahian on Monday and noted a “tangible move forward” in reviving the Iran nuclear deal, Russia’s foreign ministry said.