By Yuka Obayashi

TOKYO, Reuters – On Tuesday oil prices dropped as investors lost profits on the rally to 7-year highs yesterday and global stock markets plummeted. However losses were capped in part by concerns that Russia could invade Ukraine and cause disruptions.

Futures were at $96.19 per barrel by 0205 GMT. This was down 29c or 0.3% after increasing $2.04 Monday.

U.S. West Texas Intermediate oil dropped by 36 cents (or 0.4%) to $95.10/barrel after having gained $2.36 on the previous day.

The benchmarks hit their highest level since September 2014 Monday with Brent at $96.78 and WTI at $95.82.

Russia is the largest producer of oil and gas in the world. Fears that it might invade Ukraine led to a surge in oil prices towards $100 per barrel. This level has not been seen since 2014.

Hiroyuki Kukawa, Nissan OTC Securities general manager of research said that investors scooped up the gains from Monday’s rally but were hesitant in taking new short positions as a result of rising tensions.

He said that oil markets could see an immediate correction if the Iran/U.S. nuke deal is signed or global equity prices tumble more amid concerns over inflation and tighter central bank monetary policy.

Fund managers remain bullish about the prospects for oil. However, oil prices have risen more than 30% within three months. There are also growing worries about inflation and rising interest rates. Fund managers took some profits last week.

The talks between Iran and America are also being watched closely by investors. According to the Iranian foreign minister, Iran is “in a hurry”, in order to quickly reach an agreement at Vienna’s nuclear talks. However, Iran must ensure its national interests remain protected.

The U.S. warned that Russia might soon invade Ukraine and global stock markets fell Monday. [MKTS/GLOB]

Volodymyr Zelenskiy, the Ukrainian president, called for Ukrainians to raise their flags and sing in unison the Ukrainian national anthem on February 16, which some Western media have suggested could be the start of an invasion by Russia.

Numerous Western media organizations have quoted U.S. government officials, citing that date as the time when Russian forces are ready for attack.

Fatih Birol (International Energy Agency) called on OPEC+, the Organization of the Petroleum Exporting Countries, and allied producers to make a better match between their words and action.

JP Morgan Global Equity Research stated that oil prices will remain tight due to OPEC+ production shortages and concerns about spare capacity. Prices could reach $125 per barrel in the first quarter of next year.