Oil prices slumped early on Tuesday after Russia said some troops are returning to bases, which the market interpreted as a possible sign of de-escalation of the tension following several days of warnings that Russia would invade Ukraine "any day now."
Profit-taking also pushed oil prices lower as investors and speculators moved to cash in after oil prices hit $96 early on Monday.
As of 8:04 a.m. EST on Tuesday, WTI Crude was down by 3.31% at $92.44, and Brent Crude prices were falling by 3.03% to $93.71.
The geopolitical risk premium continues to drive the oil market, as evident in today's price move lower after Russia signaled it's pulling some of its troops and returning them to their permanent bases in Russia.
Units of Russia's military are heading back to base by rail and by truck at the conclusion of their drills, the Russian Defense Ministry said on Tuesday, as quoted by news agency Interfax.
The Russian Defense Ministry has also released a video showing Russian armored vehicles returning to base from drills.
Russia has denied it has plans to invade Ukraine, while the U.S. and the West have said in recent days that an invasion could be imminent.
Following the news out of Russia today, Ukraine said, as carried by the BBC, that "when we see the withdrawal, then we'll believe the de-escalation."
The build-up of Russian military along the border with Ukraine has rattled energy markets, with oil prices spiking amid fears that a conflict could disrupt oil and gas supplies or lead to severe sanctions against Russia's industry, including the energy sector.
While some of the oil's recent rally is due to the geopolitical risk premium, the other part is due to the signs of tightening market with U.S. inventories falling. Crude inventories at Cushing, Oklahoma—the designated delivery point for WTI Crude oil futures contracts—have been falling in the past five weeks. The American Petroleum Institute's (API) inventory estimate later on Tuesday will shed light on the stockpiles as of the end of last week.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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