WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange extended Monday's losses into early trading Tuesday, sending the international crude benchmark below $91 per barrel (bbl) on a combination of easing geopolitical risks, including partial lifting of Iranian sanctions on civilian nuclear projects ahead of the final stretch in multinational talks in Vienna this week, and potential for deescalating tensions between Russia and the West following France President Emmanuel Macron's visit to Moscow.
After marathon meetings in Moscow and Kiev, Macron told journalists he was able to receive assurances from Russia's President Vladimir Putin that the situation in Ukraine would not deteriorate any further, adding that "there is no security for the Europeans if there is no security for Russia."
Putin signaled negotiations that lasted more than five hours were productive, saying "a number of Macron's ideas are a possible basis for further steps. We will do everything to find compromise that suits everyone."
Moscow has demanded North Atlantic Treaty Organization forces be withdrawn from Eastern Europe and Ukraine, Russia's immediate neighbor on its western border, and that Ukraine would never be granted membership in the alliance. United States and NATO rebuked the demands, citing NATO's policy of "open doors" and principle of "self-determination."
For the energy markets, the winter's escalation of tensions along the Russian-Ukrainian border fueled concerns over interrupted gas flow from Russia to the European Union, sending EU gas prices to record highs. Russia supplies between 40% and 50% of Europe's gas consumption, about 200 billion cubic meters (bcm) a year, of which around 100,000 bcm goes via the central and northern pipeline routes, which includes the Ukrainian network.
Separately, oil traders are watching for signs of progress in Iranian nuclear talks that have appeared to reach their final stage this week after U.S. President Joe Biden renewed waivers for Iranian nuclear projects designated for civilian use. Representatives from Moscow and Tehran have suggested the new deal could be imminent now that the Biden administration is ready to negotiate.
White House has come under intense scrutiny for rising gasoline prices that have rallied to seven-year highs, with the energy index expected to be the largest contributor of inflation in January. The headline inflation figure likely climbed above 7% last month -- the highest since 1982. Out of all items that are part of U.S. consumer price index, gasoline prices posted the single largest increase last year, surging 49.8% in the 12 months ending in December. In Eurozone, inflation for January came in at a record-high 5.1%, also driven by the energy index, despite easing costs for manufactured goods.
Lifting sanctions on Iranian crude oil exports could offer much-needed relief for dwindling oil inventories across countries that are part of the Organization for Economic Cooperation and Development. A S&P Platts analysis suggests Iran could immediately boost crude oil exports by 700,000 barrels per day (bpd), bringing them back to pre-sanctions era of 2 million bpd. The country currently produces around 2.476 million bpd, 1.5 million bpd below 2017 level, a year before Trump withdrew from the nuclear arrangement known as the Joint Comprehensive Plan of Action.
Near 7:30 a.m. ET, March West Texas Intermediate futures fell below $90 bbl, shedding $1.64 in overnight trading, and Brent crude for April delivery declined $1.87 to $90.83 bbl. NYMEX March RBOB futures plummeted more than 5 cents or 1.9% to $2.6354 gallon and the front-month ULSD contract slumped 6.16 cents to $2.7938 gallon.
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