Oil Falls amid Russia’s Peace Talk, Sheds $15 in 2-Day
Oil prices were sharply lower early on Tuesday after Russia said it will reduce military activity around the Ukrainian cities of Kyiv and Chernihiv as peace talks between the two countries began in Turkey.
West Texas Intermediate (WTI) crude oil for May delivery was last seen down US$6.40 to US$99.56, falling from nearly US$108 prior to the reports of Russia’s plan to pull back. May Brent crude, the global benchmark, was down US$6.83 to US$105.65 per barrel, down from US$114.83 overnight.
Alexander Fomin, Russia’s deputy defense minister, said the country will “drastically reduce” military activity around the two Ukrainian cities “in order to increase mutual trust and create the necessary conditions for further negotiations”, according to a Washington Post report, following the start of peace talks.
Ukraine offered to remain neutral in exchange for security guarantees.
Oil has now shed more than US$15.00 per barrel since Friday on hopes for an end to Russia’s unprovoked invasion of its neighbour and on demand concerns after China imposed a two-stage lockdown on Shanghai, the country’s commercial centre, to quell rising Covid-10 infections in the city.
“According to official figures, Shanghai accounts for roughly 4% of Chinese oil demand. In response to the surge in coronavirus cases in Shanghai and other regions of China, the energy consultant firm Energy Aspects has downwardly revised its forecasts for Chinese oil demand by 700,000 barrels per day in March and by 600,000 barrels per day in April,” Commerzbank analyst Carsten Fritsch said in a note.
After reporting a new daily record for asymptomatic infections, Shanghai, China’s financial capital, was shut down in two stages over the next eight days. Up to 200,000 barrels per day (bpd) of demand is expected to be impacted for the duration of the restrictions.
“Global oil demand has been showing signs of weakness in the month of March and this weakness is expected to persist through April and May due to the impact of high oil prices globally, the negative effects of sanctions and war in Russia and Ukraine, and the consequences of increasing lockdowns in China,” Claudio Galimberti, Rystad Energy’s senior vice president of analysis, said in an e-mailed note.
Experts say between 1.2 and 1.5 million bpd of Russian crude exports have been lost since the start of the invasion of Ukraine on Feb. 24, while around 3 million bpd is expected to be rerouted from Europe to Asia.
“The OPEC+ meeting on March 31, 2022, will shed light on whether the UAE and Saudi Arabia are willing and able to fill some of the gap left by Russia’s crude export loss,” Galimberti said. READ: Oil Falls as EU Excuses Russia’s Crude from Sanctions
Investors are now monitoring the upcoming meeting of major oil producers of the OPEC+ group, of which Russia is a member.
Except for slight output increases from baseline rises of the UAE, Iraq, Kuwait, Saudi Arabia and Russia starting from May, the group is expected to keep its 400,000 bpd production scheme unchanged.
#Oil Falls amid Russia’s Peace Talk, Sheds $15 in 2-Day
