Oil prices tumbled to their lowest in almost three weeks on Tuesday as supply disruption fears eased and surging COVID-19 cases in China spurred demand concerns.
Brent futures were down $7.89, or 7.3%, at $99.01 a barrel by 1446 GMT while U.S. West Texas Intermediate (WTI) crude was down $7.97, or 7.7%, at $95.04.
Brent fell as low as $97.44 and WTI hit $93.54, their lowest since Feb. 25.
The steep decline followed a statement from Russian Foreign Minister Sergei Lavrov, saying that Moscow is in favour of the 2015 Iran nuclear deal resuming as soon as possible.
ALSO READ: Wall Street climbs as crude oil prices slide, Federal Reserve in focus
The talks to revive the nuclear accord, which would lead to sanctions on Iran's oil sector being lifted and allow Tehran to resume crude exports, had recently stalled because of Russian demands.
Prices extended losses from the previous day's 5% decline as a Ukrainian negotiator said on Tuesday that talks with Russia over a ceasefire and withdrawal of Russian troops from Ukraine are ongoing.
Meanwhile, Western sanctions against Russia have failed to deter China and India from buying Russian crude.
A steep jump in daily COVID-19 infections in China added further price pressure.
The U.S. Federal Reserve, meanwhile, is widely expected to raise interest rates by 25 basis points on Wednesday for the first time in four years to fight soaring inflation. Such a move could strengthen the U.S. dollar and dampen demand for commodities priced in the currency.
Brent has lost almost $40 since 14-year highs reached on March 7. WTI, meanwhile, has fallen by more than $30.
However, Tuesday's steep price decline surprised several analysts.
"With the fundamental situation hardly changed, and with the tensions and uncertainties around the war in Ukraine still high, it is puzzling to witness the risk premium evaporate so swiftly," said Julius Baer analyst Norbert Rucker.
In addition to the Russia-Ukraine conflict, spare crude production capacity remains limited from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+.
"As the oil market tightness persists through the medium term, we believe the elevated risk premium in oil prices will remain," JPMorgan said on Tuesday.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
