DTN Oil

WASHINGTON (DTN) -- Crude and refined products futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session with sharp losses amid a one-two punch of de-escalating tensions along the Russian-Ukrainian border after Moscow pulled some of its troops back to their bases, signaling a diplomatic resolution to the ongoing security crisis in Eastern Europe, and progress in multilateral talks in Vienna, where diplomats are ironing out details of a nuclear deal with Iran.

Overshadowed by the development at the Russian border with Ukraine, diplomatic efforts in Vienna to bring Iran back into compliance with the Joint Comprehensive Plan of Action still pose one of the major headwinds for higher oil prices at the moment. According to multiple sources, Iran has offered its final package of proposals to the Western powers, calling it the conclusion of the "final stage" of the talks that began in April 2021. Iranian Foreign Minister, Hossein Amir-Abdollahian, added that his country is "in a hurry for a good agreement, but it must be within the framework of logical talks and to achieve the rights of the Iranian nation."

Tanker Tracker data shows Iranian crude and oil condensate exports surged to 1.4 million barrels per day (bpd) in the last two months -- up sharply from under 500,000 bpd in mid-2020. At this rate, Iranian crude oil exports are still more than 1 million bpd below the 2018 average -- a year before the Trump administration withdrew from JCPOA and reimposed harsh sanctions on the country's oil industry.

The situation remains fluid, but traders expect resolution in Vienna nuclear talks any day now.

Underlying Tuesday's sell-off in the oil complex is an apparent breakthrough in Russia's standoff with the West after the Kremlin confirmed partial withdrawal of its troops from the Ukrainian border. The move comes less than 72 hours after the U.S. government warned of an imminent Russian attack on eastern Ukraine, relocated its Ukrainian Embassy close to the Polish border, and called on its citizens to leave the country as soon as possible.

Fears of a Russian attack, the impact of sanctions on the global economy, and surging commodity prices hit broader markets hard Monday, pulling both the Dow Jones Industrial Average and S&P 500 Index into negative territory for the session, lifting gold prices to the highest levels in eight months, and sparking an oil price rally that took U.S. crude past $95 for the first time since 2014.

On Tuesday, U.S. benchmark fell more than $3 to settle a tad above $92 barrel (bbl), and international crude benchmark Brent for April delivery declined to $93.28 bbl after topping $96 bbl Monday. NYMEX March RBOB futures slumped 11 cents to $2.6691 gallon, and the front-month ULSD contract slumped 10.23 cents to $2.8595 gallon.

Separately, U.S. crude oil stockpiles are expected to have decreased by 600,000 bbl for the week ended Feb. 11, with estimates ranging as wide a 3.5 million bbl decrease to an increase of 3 million bbl. Currently, U.S. crude oil inventories stand at their lowest stock level since September 2018 and about 11% below the five-year average. Gasoline stockpiles are expected to have risen by 500,000 bbl from the previous week, while stocks of distillates, which include heating oil and diesel, are expected to have decreased by 1.7 million bbl. The U.S. refinery run rates likely fell by 0.7% from the previous week to 87.5% of capacity.

The closely watched survey from the American Petroleum Institute is scheduled for release at 4:30 p.m. EST, followed by official report from the U.S. Energy Information Administration to be released Wednesday morning.

Liubov Georges can be reached at liubov.georges@dtn.com