Oil futures settled lower on Tuesday, with U.S. prices briefly dipping below $100 a barrel for the first time since mid-month, after Russian news reports said officials described talks with Ukraine as constructive.
West Texas Intermediate crude for May delivery
fell $1.72, or 1.6%, to settle at $104.24 a barrel on the New York Mercantile Exchange after touching a low of $98.44. Prices, which lost 7% on Monday, settled at the lowest since March 17, according to Dow Jones Market Data.
April natural gas
settled at $5.336 per million British thermal units, down 3.1% on contract’s expiration day.
Oil moved 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 decrease military activity in the direction of Kyiv and Chernihiv, according to Russia’s TASS news agency.
Moscow’s lead negotiator in the talks with Ukraine, meanwhile, said that Russia’s promise to scale down military operations in Kyiv and northern Ukraine does not represent a ceasefire, according to the BBC.
Oil prices declined “over hopes of progress in the peace talks between Russia and Ukraine,” said Mihir Kapadia, chief executive officer of Sun Global Investments, in emailed commentary.
Russia’ unprovoked Feb. 24 invasion of Ukraine 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.
Oil prices saw “further downward pressure due to Shanghai imposing a two-stage lockdown,” said Kapadia. The move sparked worries about crude demand.
Crude prices had dropped by around 7% 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.
Meanwhile, 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.
In a July meeting last year, OPEC+ said that starting May 1, 2022, baseline output for the group would see a modest increase for some members, but the group as whole has been unable to meet their full production quotas.
The Energy Information Administration will release its data on U.S. petroleum supplies Wednesday, covering the week ended March 25. On average, analysts forecast supplies declines of 1.7 million barrels for crude, 1.9 million for gasoline and 1.5 million for distillates, according to an S&P Global Commodity Insights survey.