Oil Retreats Again as Traders Take Stock of Ukraine Crisis, Iran

(Bloomberg) -- Oil headed for a weekly loss as investors weighed the crisis over Ukraine and the possibility that Iran’s nuclear deal may be revived.

West Texas Intermediate fell below $90 a barrel, extending Thursday’s 2% drop. The U.S. crude benchmark is on course for its first weekly decline this year, ending an eight-week run of gains.

After the U.S. ramped up warnings in recent days of a possible Russian attack on Ukraine, U.S. Secretary of State Antony Blinken and Russia Foreign Minister Sergei Lavrov have agreed to meet for talks next week. Moscow said it has no plans to attack its smaller neighbor. 

Crude remains close to the highest since 2014 after a blistering rally underpinned by roaring demand, constrained supply, and declining inventories. The market’s pricing structure still points to robust demand for physical barrels, with traders willing to pay steep premiums for near-term supplies.

There’s mounting speculation Iran’s nuclear deal may be revived, potentially paving the way for the removal of U.S. sanctions on the nation’s crude exports. Earlier this week, Tehran’s top negotiator, Ali Bagheri Kani, tweeted that efforts to restore the deal are “closer than ever” to an agreement.

“The Ukraine crisis is taking a back seat to the prospect of Iranian barrels flooding the market,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. “For all the talk of war and conflict, market players remain unconvinced. This is perhaps why the geopolitical risk premium is starting to wane.”

Issues surrounding Iran’s nuclear accord are set to be discussed at a key transatlantic security meeting in Munich this weekend. A lifting of sanctions on oil shipments from the Persian Gulf producer would be a later phase of the agreement, Reuters reported, citing a draft text and unidentified diplomats.

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