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Oil futures turned lower Tuesday, extending a sharp slide seen the previous session, after Russian news reports said officials described talks with Ukraine as constructive.
Price action
-
West Texas Intermediate crude for May delivery
CL.1,
-5.21% CLK22,
-5.21%
fell $4.67, or 4.4%, to $101.29 a barrel on the New York Mercantile Exchange. -
May Brent crude
BRN00,
-4.93% BRNK22,
-5.04% ,
the global benchmark, shed $4.60, or 4.2%, to $104.89 a barrel on ICE Futures Europe.
Market drivers
Oil turned lower after Russia’s Interfax news agency quoted the head of Moscow’s delegation as calling negotiations with Ukraine officials in Turkey constructive. Also, Russia’s deputy defense minister Alexander Fomin said Russia would “radically reduce” military activity outside Kyiv and Chernihiv, according to Russia’s Tass news agency, the BBC reported.
Crude prices dropped by around 7% on Monday after China imposed a lockdown on Shanghai, the nation’s financial capital and largest city, as part of its effort to stop a renewed spread of COVID-19 cases. The move sparked worries about crude demand.
Read: Shanghai lockdown tests ‘zero-COVID’ limits, shakes markets
Optimism over renewed cease-fire talks between Russia and Ukraine may have also weighed on sentiment Monday, analysts said. Negotiators met in Turkey on Tuesday for the first time in two weeks, after news reports said Moscow appeared to have softened some of its demands.
Russia’ unprovoked Feb. 24 invasion of Ukraine has sent crude prices soaring, with both WTI and Brent trading near 14-year highs in early March.. The U.S. and its allies have imposed sweeping sanctions on Moscow aimed at cutting the country off from the global economy, though only the U.S. and U.K. have formally moved to ban imports of Russian oil and energy products.
Citing industry data and Bloomberg, analysts at Commerzbank said Russian oil exports in the week from March 17-23 averaged 3.63 million barrels per day down 26.4% from the preceding week.
Some market participants have been reluctant to buy or finance the trading of Russian crude despite the lack of a wider embargo.
“Russian oil is still difficult to sell. Three oil tankers with a total of 280,000 tons of Urals on board have been anchored in the Mediterranean for 7-10 days, according to Bloomberg data, and are waiting in vain to be unloaded,” Commerzbank said.
OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, will meet this week. Analysts appear to widely expect the group to stick to its plan to boost production by another 400,000 barrels a day in May.
See: Why OPEC+ is likely to stick to its oil output plan when it meets next week
