Oil prices slumped on Friday, falling more than 3 percent before recovering lost ground later in the day, as Western leaders sounded the alarm about an imminent Russian invasion of Ukraine.
Markets are worried about the potential of a supply disruption from conflict in Ukraine since Russia produces about 10 million barrels of oil a day. But they are also reacting to reports that talks to revive a nuclear deal with Iran are making progress, a development that could bring tens of millions of barrels of oil to the market.
On Wednesday, an Iranian negotiator, Ali Bagheri Kani, tweeted: “After weeks of intensive talks, we are closer than ever to an agreement; nothing is agreed until everything is agreed, though.”
Brent crude, the international benchmark, was trading at $92.92 a barrel, down 0.2 percent. West Texas Intermediate slipped 0.3 percent to $91.37.
While obstacles to a new Iran deal remain, some analysts say that it appears both sides want to overcome them.
“The signs to me, both from Tehran and from Washington, are very clear,” said Scott Modell, managing director of Rapidan Energy Group, an advisory firm. “I think we have what we need in terms of concessions on both sides to get a deal,” added Mr. Modell, a former Central Intelligence Agency officer.
Richard Bronze, head of geopolitics at Energy Aspects, a research firm, said that the markets were being “torn between the risks of escalation” of the standoff at the Ukrainian-Russian border and what seems a growing potential for a deal in the indirect negotiations between Iran and the United States.
At present, the prospect of a deal with Iran seems to be outweighing worries over a disruption to oil supplies stemming from conflict between Russia and Ukraine. “Geopolitics has been driving a lot of the moves up and down,” Mr. Bronze said.
Iran has as much as 80 million barrels of oil in storage, he said, some of it on tankers near Asian markets, ready to sell at short notice. Tehran could then ramp up domestic production by 1.2 million barrels a day within eight months, bringing substantial new supplies to the market.
Should a deal happen, and if the oil that is now stored is dumped on the market quickly, that could pull prices down, Mr. Bronze said. But over time, he added, the world would need the Iranian oil. Other analysts, though, say that global markets may wind up being oversupplied later in the year.
Traders’ calculations could of course change quickly in the event of war breaking out over Ukraine or if the talks with Iran collapse.
When it comes to Ukraine, the worries about disruption are more focused on natural gas than oil. Reflecting a tight market and fraught geopolitics, European gas prices are more than four times higher than they were a year ago, a situation that is putting pressure on households and businesses, like fertilizer makers and metal producers, that use a lot of energy.
About one-third of Europe’s natural gas supplies come from Russia, mostly through a network of pipelines. Some analysts doubt that President Vladimir V. Putin of Russia would want to cut off gas supplies to his most important customers, like Germany and Italy, but pipelines through Ukraine could become collateral damage of fighting, and some analysts worry that Mr. Putin might further squeeze energy supplies to retaliate for sanctions imposed by the West.
Analysts believe that Europe could deal with a short disruption of gas deliveries from Gazprom, the Russian gas monopoly. A warm winter during the time of heaviest gas consumption has helped. This week, Ursula von der Leyen, the European Commission president, told reporters, “Our models now show that for partial disruption or further decrease of gas deliveries by Gazprom, we are now rather on the safe side.”
But to prepare for a longer cutoff, Europe might need to take strong measures. Such changes are already occurring in the current tight market.
Flows of liquefied natural gas, largely from the United States, have outpaced imports of Russian gas to Europe in recent weeks. If Moscow further squeezed supplies, Europe is likely to ask other suppliers, like Algeria, Azerbaijan and Norway, to rev up flows, analysts say.
Europe could also take further measures, including restarting mothballed coal plants and delaying scheduled shutdowns of nuclear plants in Germany. Henning Gloystein, a director at Eurasia Group, said that businesses could ultimately be shut down and, as a last resort, households could see their energy supplies rationed.