Crude oil futures plunge $2/b as Iran nuclear deal nears

Crude oil futures were sharply lower in mid-morning Asian trade Feb. 17 as Iranian nuclear talks were nearing a deal, while US crude oil stocks unexpectedly rose last week. Physical crude, though, was seen surpassing $100/b.

The bearish developments overshadowed reports of a build up of Russian forces on the Ukrainian border, contrary to Moscow's claims of a pullback.

At 10:30 am Singapore time (0230 GMT), the ICE April Brent futures contract was down $2/b (2.12%) from the previous close at $91.81/b, while the NYMEX March light sweet crude contract fell $2.12/b (2.22%) at $91.54/b.

"Ongoing talks between Iran and world powers to revive the 2015 nuclear agreement reignited hopes for more crude oil supply from the Middle Eastern country, weighing on prices," IG Daily FX strategist Margaret Yang said in a Feb. 17 note.

Iranian nuclear talks, the latest of which kicked off in Vienna on Feb. 8, seemed closer than ever to a deal after Iran's top negotiator Ali Bagheri Kani said on Twitter Feb. 16 that US and Iran were nearing an agreement.

"After weeks of intense negotiations, we have come closer to an agreement than ever, but nothing has been agreed until everything has been agreed," Kani tweeted.

Earlier in the day, US State Department spokesperson Ned Price said the sides were in the "very final stages" of negotiations.

An interim deal could potentially increase exports by 700,000 b/d, according to S&P Global Platts Analytics.

The latest development overshadowed rising tensions on the Ukraine-Russia border. The US and Estonian intelligence reported a significant number of troops moving towards the Ukrainian border, despite Moscow's claims to the contrary.

"Uncertainty over whether or not Russia is de-escalating tensions on the Ukrainian border remains. Markets remain caught between geopolitical anxieties and inflation concerns," ANZ Research analysts said in a note.

Physical crude benchmark Dated Brent, however, was seen surpassing $100/b on Feb. 16 to be assessed at $100.795/b, up $3.14/b on the day, Platts data showed. This is the highest since Sept. 4, 2014, a sign of persistent tightness in oil markets.

In the US, latest data from the Energy Information Administration showed US crude oil stocks climbed 1.12 million barrels to 411.51 million barrels in the week ended Feb. 11. Analysts surveyed by S&P Global Platts on Feb. 14 pointed to a 200,000-barrel draw over the period.

Worryingly, crude stocks at the NYMEX delivery point of Cushing, Oklahoma, continued to fall, edging 1.9 million barrels lower to 25.83 million barrels in the week ended Feb. 11, the EIA said.

Cushing stocks have declined for six straight weeks, draining 11.5 million barrels of crude from the key storage site and leaving stocks at its lowest since September 2018.