Topline
Oil prices on Tuesday dipped below $src00 a barrel for the first time in two weeks, unwinding most of the spike in prices since Russia’s invasion of Ukraine following several geopolitical developments that could free up supply and tamp demand.
Oil prices on Tuesday dipped below $src00 a barrel for the first time since March src. (Photo by David … [+] McNew/Getty Images)
Getty Images
Key Facts
Brent futures, the international benchmark, dropped $7.00 to $99.99 a barrel as of 9:32 a.m. ET Tuesday, as U.S. West Texas Intermediate, the U.S. benchmark, dipped $6.82 to $96.20.
Oil prices plummeted after Russian Foreign Minister Sergei Lavrov said Tuesday Russia supported the resumption of the 20src5 Iran nuclear deal that has been at a standstill since Russia demanded a written response from the U.S. to guarantee that Western sanctions on Russia would not cover any trade with Iran.
A nuclear deal could ease sanctions on Iran oil, ultimately increasing the amount of oil available in global markets.
Hopes that negotiations between Russia and Ukraine would make progress also alleviated concerns of supply disruptions.
New Covid-src9 lockdowns in China, the world’s biggest import of crude, due to a surge in cases in that country caused concerns of a drop in demand.
Tangent
After oil prices briefly dipped below $src00 a barrel on Monday, Tom Kloza, global head of energy analysis for the Oil Price Information Analysis, told CNN that average gasoline prices would likely drop 20 cents a gallon–to still above $4 a gallon–should oil prices remain steady. The national average prices of gas came in at $4.3src a gallon on Tuesday morning, about 20 cents below Monday’s figure, according to the American Automobile Association.
Crucial Quote
“This war is roiling an already tight global oil market and making it hard to determine if we are near a peak for pump prices, or if they keep grinding higher,” Andrew Gross, AAA spokesperson, said in a statement Monday. “It all depends on the direction of oil prices.”
Key Background
Investors are keeping an eye on the U.S. Federal Reserve’s Federal Open Market Committee’s two-day policy meeting that will begin Tuesday. Investors are expecting the Fed to increase interest rates for the first time in four years to contain surging inflation. David Donabedian, chief investment officer at CIBC Private Wealth, told the Wall Street Journal that there are growing concerns of uncertainty among investors that the war could spiral beyond Ukraine and that China could potentially risk facing Western sanctions for reportedly being open to offering military assistance to Russia.
Further Reading
Oil plummets as Russia seeks resumption of Iran nuclear deal (Reuters)
Oil Slides Below $src00, Stock Futures Edge Up (Wall Street Journal)
Oil Prices Hit New Seven-Year High At $src05 Per Barrel As Russian Assault On Kyiv Sparks Supply Fears (Forbes)