Oil Prices Retreat on Prospect of Iran oil Sanctions Easing

Oil prices retreated on Friday after wild swings during the week, as the prospect of extra supply from Iran returning to the market outweighed fears of a possible Russian invasion of Ukraine, which could disrupt supply.

Brent crude LCOc1 futures fell 68 cents, or 0.7%, to $92.29 a barrel at 0124 GMT, extending a 1.9% drop from the previous session.

U.S. West Texas Intermediate (WTI) crude CLc1 futures shed 67 cents, or 0.7%, to $91.09 a barrel, after sliding 2% in the previous session.

Both benchmark contracts were headed for their first weekly fall in nine weeks after hitting their highest points since September 2014, with a deal taking shape to revive Iran's 2015 nuclear agreement with world powers.

Diplomats said the draft accord outlines a sequence of steps that would eventually lead to granting waivers on oil sanctions. That would bring about 1 million barrels a day of oil back to the market, but the timing is unclear. 

"Nevertheless, the spectre of a potential 1 million b/d hitting the oil market saw Brent crude oil prices come under pressure," ANZ Research analysts said in a note.

Analysts do not expect prices to fall much in the near term, even with the prospect of a return of more Iranian oil, with the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, struggling to meet their production targets.

"Oil markets are vulnerable to supply disruptions given global oil stockpiles are tracking near seven‑year lows and as OPEC+ spare capacity comes into question given disappointing OPEC+ supply growth," Commonwealth Bank (CBA) analyst Vivek Dhar said in a note.

With oil demand also recovering as air travel and road traffic picks up, CBA sees Brent holding in the $90 to $100 a barrel range in the short term and topping $100 "quite easily" if tensions escalate between Russia and Ukraine.

U.S. President Joe Biden is set to host a call on Friday on the Ukraine crisis with the leaders of Canada, France, Germany, Italy, Poland, Romania, Britain, the European Union, and NATO, the office of Canada's Prime Minister Justin Trudeau said. 

(Reporting by Sonali Paul. Editing by Gerry Doyle)