Brent crude and West Texas Intermediate fell 7% on Monday, followed by a second drop of 7% on Tuesday before bouncing off session lows.
Oil prices fell 2% on Tuesday as talks between Russia and Ukraine progressed to end their week-long conflict, though Moscow negotiators said the promise to reduce some military operations did not represent a ceasefire. .
More weight on oil futures, as new lockdowns to curb the spread of the coronavirus in China raised concerns that fuel demand could take a hit.
Brent crude was down $2.25, or 2%, at $110.23 a barrel, while US West Texas Intermediate (WTI) crude was down $1.72, or 1.6%, at $104.24.
Both benchmarks fell 7% on Monday and fell 7% again on Tuesday before closing the session lower.
Ukrainian and Russian negotiators met in Turkey for the first face-to-face discussion in nearly three weeks. The top Russian negotiator said the talks were “constructive”.
Russia promised to reduce its military operations around Kyiv and northern Ukraine; Ukraine offered to adopt a neutral position but with international guarantees that it would be protected from attack.
Oil fell to the bottom of the session when Moscow’s chief negotiator cautioned that Russia’s promise to reduce military operations did not represent a ceasefire and that a formal deal with Kyiv was a long way off.
“There may be reasons to be a little more optimistic this time than yesterday, but I don’t think this whole situation with Ukraine is going to go away in the next 15 minutes,” said Robert Yoger, executive director of Energy Futures. Mizuho.
Sanctions imposed on Russia over its invasion of Ukraine had disrupted oil supplies and pushed oil prices to around $140 a barrel, the highest in nearly 14 years.
New lockdowns in Shanghai to curb rising coronavirus cases also put pressure on prices on Tuesday as markets worried about a slump in Chinese demand. Analysts at ANZ Research said Shanghai accounts for about 4% of China’s oil consumption.
Traders and analysts said the lockdown has reduced consumption of transportation fuel in China to such an extent that some independent refiners are trying to resell purchased crude for delivery in the next two months.
Weakness in global oil demand is expected to persist through April and May, said Claudio Gallimberti, senior vice president of analysis for Rystad Energy, citing Russia-Ukraine tensions, higher oil prices and China’s COVID-19 situation.
US crude oil stocks fell by 3 million barrels last week, more than the 1.0 million-draw polled by Reuters, citing data from the American Petroleum Institute. Government inventory data is due on Wednesday. [EIA/S]
At the start of the session, oil prices rose nearly $2 as Kazakhstan’s continued disruption in supplies and major producers showed no signs of rushing to ramp up production.
Kazakhstan is set to lose at least a fifth of its oil production for a month following storm damage to mooring points used for crude exports from the Caspian Pipeline Consortium (CPC), the energy ministry said. .
The OPEC+ producer group is expected to stick to its plan for modest output growth in May despite higher prices and calls for more supplies from the United States and other consumers.
The energy ministers of Saudi Arabia and the United Arab Emirates, key members, said OPEC+ should not engage in politics because they are under pressure to act against Russia over its invasion of Ukraine.
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