Oil heads for weekly loss as bumper rally starts to ease off

Bloomberg

Oil headed for the first weekly loss in two months as investors weighed the crisis over Ukraine and the potential return of Iranian barrels to the market.
West Texas Intermediate slipped, trading near $91 a barrel after losing as much as 3% on Friday. Oil’s recent rally has shown signs of cooling, albeit from an exceptionally high level. The North Sea market has seen differentials for physical barrels ease, while refining margins have come under pressure. One oil-focused exchange-traded fund saw its biggest daily withdrawal since July 2020.
Mounting speculation that Iran’s nuclear deal may be revived is damping some of the bullish signals. The deal could pave the way for the removal of US sanctions on the nation’s crude exports, adding much-needed supply to the market.
Still, geopolitical tensions over Ukraine continue to run high. Prices of commodities from gas to metals and food have swung this week with every twist and turn in the standoff between the West and Russia.
After the US ramped up warnings of a possible Russian attack on Ukraine, Russian officials continued to reiterate that no invasion of Ukraine was underway and none was planned. US Secretary of State Antony Blinken and Russia Foreign Minister Sergei Lavrov have agreed to meet for talks next week.
Crude rises to the highest since 2014 this week in a blistering rally underpinned by roaring demand, constrained supply, and declining inventories. The underlying market is one of the strongest its been in years, and Dated Brent, a more immediate measurement of oil prices, hit $100 a barrel. While the market remains strong, prices have weakened as the geopolitical risk premium has declined in the past few days.
“It doesn’t matter how tight the oil market is right now, energy traders are taking risk off the table,” said Ed Moya, Oanda’s senior market analyst for the Americas. “In addition to the Ukraine situation, Iran nuclear talks continue to head in the right direction, potentially paving the way for more barrels of crude to hit the oil market later this year.”
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.