Why did oil prices fall sharply under the oil ban?

A diplomatic solution to the prospect of Russian military aggression against Ukraine would help cushion the global energy supply shock that has led to soaring commodity prices
.

On March 15, oil prices extended their decline, with West Texas light intermediate crude oil futures falling below $96 a barrel, the lowest level
of the month.

Oil prices are now almost falling back to pre-war levels as bullish traders have profited from pre-rally bets and new funds are reluctant to buy
.

Oil stocks fell sharply, with Chevron (CVX) down 5.
6% and ExxonMobil (XOM) down 6%, their biggest drop
since June 2020.
The energy index ETF-SPDR (XLE) fell 4.
5%.

U.
S.
crude oil closed at $109 a barrel on March 11 and reached a high of nearly $125 last week, but has fallen more than
10 percent this week.
International benchmark Brent crude futures also fell more than 6 percent on March 15 to $99.
60 a barrel, having topped $
130 last week.

The sell-off comes at a time when ceasefire talks between Russia and Ukraine are expected to materialize, while China is implementing epidemic controls, which could weaken demand for
oil.

"A diplomatic solution to the prospect of Russian military aggression against Ukraine will help cushion the global energy supply shock that has caused commodity prices to soar," said
Victoria Skoller, head of investment at Interactive Investor.

"At the same time, China's pandemic policy response raises the likelihood of a sharp drop in oil demand in the world's second-largest economy, raising concerns," she added
.

Technology is clearly at play as well
.
In March, traders aggressively went long for crude oil, and if the crude oil futures price exceeded $100, they would be rewarded
.
There is evidence that many of them sold positions
when oil prices soared.
Bloomberg data shows that open positions in oil futures are currently at their lowest level
in 6 years.

The Relative Strength Index, an indicator of the oil market's momentum indicator, which measures price changes, has fallen from a high above 80 to around
40.
In general, an index above 70 indicates that the asset is overbought
.

Mizuho Securities Energy Futures Head Robert ? Robert Yawger told Barron: "When the index rises to 80, it means the last bull market has arrived
.
It's a way to
extend upwards.
”

"Trading in other products is even more active, with the relative strength index of heating oil above 90
last week," YAG said.
I've been doing this for over 30 years and I've seen more than 90 times I can count on
one hand.
”

It's clear that small investors who bought oil above $100 a barrel saw the reversal and pulled out
quickly.

There are some root causes and geopolitical reasons for this, but the market positioning also has a lot of say in the direction of this market
.

Marshall Gittler, head of investment research at BDSwiss, noted that oil prices are not much off the level they were at before the
Russian invasion a month ago.

He said: "OPEC and other countries have always pointed out that there is no oil shortage at present, but they are worried about the future oil shortage
.
Future oil prices are not much different from a month ago
.
”

If there is no change in the Ukraine conflict, the next important indicator will be the weekly oil update released by the Energy Information Administration, which will contain information on
U.
S.
oil supply and demand.