Oil prices fell more than 5% on Monday amid hopes of diplomacy over Russia’s invasion of Ukraine, while a pandemic-related travel ban in China cast doubt.
Brent futures fell $5.77, or 5.1%, to $106.90 a barrel, while West Texas Intermediate (WTI) crude fell $6.32, or 5.8%, to $103.01 a barrel.
This was the lowest close since February 28 for WTI and the lowest since March 1 for Brent. Both indicators increased by about 36% after the Russian invasion of Ukraine on February 24.
Both benchmarks have recorded the most volatile 30 days since June 2020.
Oil prices reflect the downward trend stemming from the expectations regarding the positive developments in the last round of Russia-Ukraine negotiations.
Russian and Ukrainian delegations held the fourth round of talks on Monday via video link, but no new progress was announced.
China, the world’s largest importer of oil, liquefied natural gas and coal, could reduce global energy demand, prompting increased shutdowns as the Omicron epidemic spreads rapidly.
The US has banned oil imports from Russia, and the UK has said it will phase it out by the end of 2022. Russia is the world’s top exporter of crude and oil products combined, shipping about 7 million bpd or 7% of global supplies.
Despite the sanctions, Russia’s oil and gas condensate production rose to 11.12 million barrels per day (bpd) so far in March, according to some sources.
While British Prime Minister Boris Johnson tries to persuade Saudi Arabia to increase oil production, Fatih Birol, head of the International Energy Agency (IEA), is urging oil-producing countries to increase production.
India said it is ready to release more oil reserves and is also considering Russia’s offer to buy crude oil and other commodities at a discount through the rupee-ruble transaction.
49 out of 50 Republican US senators being speculated to not support a new nuclear deal. Talks between the US and Iran to revive the 2015 nuclear deal may collapse.
Analysts noted that a deal with Iran could add another 1 million bpd of oil to the market, but that would not be enough to offset the dwindling supply from Russia.
The US Federal Reserve is expected to start raising interest rates this week, which means the dollar’s value will rise. This makes dollar-denominated oil more expensive for foreign currency holders and may push oil prices down.
