After a massive sell-off on Monday, oil prices continued plummeting early on Tuesday, with Brent dipping below $100 per barrel for the first time since February 28, as speculators abandon the volatile market and Russia claims it wants the Iranian nuclear deal to be signed as soon as possible.
As of 8:30 a.m. EDT on Tuesday, WTI Crude had slumped by 7.61% at $95.22, and Brent Crude had dipped by 7.30% at $99.44. Brent Crude was trading below $100 per barrel for the first time this month, after hitting the triple-digit mark on March 1.
Most of the geopolitical premium from Russia’s invasion of Ukraine has been lost in a highly volatile market, which spooked many speculators. Concerns about Chinese demand in view of renewed lockdowns also weighed on sentiment.
Open interest in oil has dropped to the lowest since 2015, after futures exchanges have raised initial margins significantly since Putin’s war in Ukraine began, thus making trading the same amount of oil futures much more expensive. Moreover, the spike in oil prices and the heightened volatility has led many hedge funds and speculators to close out long—or bullish—positions.
On Monday, Brent Crude traded below its 21-day simple moving average (SMA) for the first time since Russia attacked Ukraine, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said.
“The war premium continues to deflate as speculators head for the hills and after the recent surges in diesel and gasoline have raised some demand concerns,” Hansen added.
Oil was plunging on Tuesday after Russian Foreign Minister Sergei Lavrov said today that Russia is in favor of the Iran nuclear deal resuming as soon as possible.
At the end of last week, the talks about the United States and Iran returning to the 2015 nuclear deal that would allow the Islamic Republic to legitimately export its oil were paused “due to external factors,” said Josep Borrell, High Representative of the EU for Foreign Affairs and Security Policy. Moscow has reportedly made last-minute demands that the sanctions against Russia over its war in Ukraine do not impede its trade with Iran.
By Tsvetana Paraskova for Oilprice.com
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