WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange accelerated losses in afternoon trade Thursday, sending the U.S. crude benchmark below $92 barrel (bbl) as investors increasingly priced in the return of Iranian crude oil exports into the global market following indications the multilateral nuclear agreement in Vienna could be reached within days.
Further weighing on the oil complex, stocks on Wall Street plummeted on Thursday, with Dow Jones Industrials shedding more than 600 points and S&P 500 Index dropping 2% after U.S. President Joe Biden warned Russia could attack Ukraine within "the next several days."
While speaking to reporters Thursday afternoon, Biden said Moscow is now engaged in a false flag operation -- a hostile action designed as if perpetrated by someone else, adding that Russia has still not moved troops from the border. To his point, over the past 24 hours there has been a sudden escalation of tensions in eastern Ukraine that reportedly involved an artillery barrage from across the lines controlled by Russia-backed separatists and the Ukrainian army.
The U.S. ambassador to the United Nations said Thursday the conflict had reached a "crucial moment," and Russia is moving toward "an imminent invasion." For its part, Russia expelled on Thursday the second highest ranking senior diplomat at the U.S. Embassy in Moscow, Bart Gorman, signaling further escalation of tensions with Washington.
Rising military confrontation in eastern Ukraine failed, however, to lift the oil complex out of the negative territory, with both U.S. and international crude benchmarks settling the session 2% lower. West Texas Intermediate for March delivery plummeted $1.90 to $91.76 bbl, with losses accelerating post settlement, and international crude benchmark Brent declined to $92.97 bbl, down $1.84 on the session. NYMEX RBOB March contract dropped 2.85 cents for a $2.6486 gallon settlement, and the front-month ULSD futures were down more than 7 cents to $2.7862 gallon.
Pressuring crude futures is the apparent breakthrough in multilateral nuclear talks in Vienna aimed at reviving the 2015 Joint Comprehensive Plan of Action.
"It is not a question of weeks, it is a question of days," said French Foreign Minister Jean-Yves Le Drian, referring to a nuclear deal that could lift sanctions on as much as 2 million barrels per day (bpd) in Iranian crude oil exports. Analysts suggest Iran holds a sizable quantity of oil in offshore storage that could be tapped immediately to take advantage of higher oil prices.
Iranian crude production plummeted from 3.8 million bpd in the second quarter of 2018 to less than 2 million bpd by mid-2020, according to secondary sources cited by the Organization of the Petroleum Exporting Countries. Exports fell from 2.2 million bpd to about 500,000 bpd in the same time frame. Data from Tanker Tracker shows that Iranian crude oil exports averaged 1.4 million bpd over the past two months, meaning Tehran still could add another 1 million bpd of oil to the global market.
With a new deal on the horizon, South Korea said on Wednesday that it held talks on resuming imports of Iranian crude oil and unfreezing Iranian funds. South Korea was previously one of Tehran's leading oil buyers in Asia.
Liubov Georges can be reached at email@example.com