Oil Plummets Over 3% As Russia Pulls Some Forces From Ukraine Border

But fear persists that oil will still breach $100 per barrel: File Image/Pixabay

Russia sending home some of its military units on Tuesday was perceived by some analysts as a sign that invasion of Ukraine may be averted, and as a result oil prices tumbled over 3 percent.

Brent settled down $3.20, or 3.3 percent, at $93.28 per barrel, while West Texas Intermediate settled down $3.39, or 3.6 percent, at $92.07 per barrel.

Given that the analytical community is divided between thinking Russia will strike Ukraine anyway or that the military build-up is merely a way to gain the upper hand in negotiations, Robert Yawger, executive director of energy futures at Mizuho, said, "It's going to be a minute-to-minute, day-to-day type of thing."

Also on everyone's radar are the talks between the U.S. and Iran on reviving Tehran's nuclear deal with world powers; Russia's foreign ministry on Tuesday said it noted a "tangible move forward" in reviving the agreement.

Neil Beveridge, senior research analyst at Sanford C. Bernstein, told Bloomberg television that Iran could potentially add 1 million barrels per day (bpd) of crude to the world market "over time," and that this would help fulfill demand growth estimated at over 3 million bpd: "We're going to need these Iranian barrels over time to keep the market balanced."

But Beveridge repeatedly stressed that the Iranian output would be a gradual build, and whether this would be enough to prevent oil prices from breaching the $100 threshold in the near future, especially considering the Russia/Ukraine situation is far from resolved.

As such, the energy ministers of Egypt and Cyprus said they were deeply concerned about the potential for $100 oil: speaking at an oil and gas exhibition conference in Cairo, Tarek El Molla remarked, "For me, being professional I can see it happening, but I don't want it to happen."

Cyprus' energy minister Natasa Pilides agreed the scenario was tangible and that "It is very difficult to deal with because on the one hand, we have the tendency particularly in the last few months of subsidizing basically which is not the norm, so we are in that difficult position where when you start doing that it is very difficult to stop it.

"We definitely need to stick to our targets in terms of the energy transition, but I would also add that natural gas has a place in that trajectory as a bridge fuel."

Meanwhile, global demand continues to gain strength: on Tuesday sources citing American Petroleum Institute figures said U.S. crude stockpiles fell by 1.1 million barrels for the week ended February 11; gasoline inventories dropped by 923,000 barrels, and distillate stocks declined by 546,000 barrels.