Crude oil fell nearly 2 percent on Tuesday after President Vladimir Putin said Russia would only use military force in Ukraine as a last resort, releasing some tension from a growing crisis that pushed prices to five-month highs in the previous session. Putin said Russia reserved the right to use all options to protect Russian citizens in Ukraine, but he ordered troops engaged in military exercises near the Ukraine border back to their bases, triggering a retreat in oil prices that had been boosted by worries the conflict would continue to escalate.
"The receding fears of a disruption of the Russian crude oil supply and the easing geopolitical concerns are weighing on crude," said Dwayne Pliska, senior trading consultant for HighGround trading in Chicago, Illinois. April Brent crude fell $2.09 to $109.11 a barrel by 1:49 pm EST (1849 GMT). The European benchmark ended the previous session at its highest close this year. US crude for April delivery fell as much as $2.07 Tuesday, after rising to $105.22 on Monday, the highest level since September 19. It was last trading $1.82 cents lower at $103.10 a barrel.
Oil products prices retreated in tandem with US crude. New York ultra-low sulfur diesel futures, often called heating oil, fell nearly 5 cents to $3.0328 per gallon, after it settled more than 6 cents higher at $3.0805 in the previous session. US gasoline RBOB fell by more than 4 cents to $2.9749 per gallon after it settled more than 4 cents higher a day earlier. Putin's statements raised investors' hopes for a peaceful resolution with Ukraine. The crisis caused a sell-off in global equities on Monday as investors worried the oil supply from Russia, the world's second-biggest crude oil exporter, could be disrupted or subject to sanctions.
Imports of Russian oil are so crucial for Europe that it is unlikely sanctions will be imposed, said Seth Kleinman, head of energy research at Citi. Russia paid a heavy financial price on Monday for its military intervention in Ukraine. Stocks, bonds and the rouble plunged as investors dumped riskier assets in favour of commodities such as gold and oil.
In Libya, top officials production at the El Sharara oilfield may resume as they are working to address protesters demands. Production there has fallen to little over 200,000 barrels per day from 1.4 million bpd in July due to protests that closed the oilfield in the eastern region of the country. Investors looked to weekly US oil inventory data to be released later on Tuesday and Wednesday to assess demand in the world's largest oil consumer. US commercial crude oil inventories were expected to have risen 1.3 million barrels on average last week, while stockpiles of refined oil products probably dropped, a preliminary Reuters poll of eight analysts showed. The American Petroleum Institute will release its data on Tuesday at 4:30 pm EST (2130 GMT). The government's Energy Information Administration will publish its data on Wednesday at 10:30 am EST.
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