As markets follow the peace talks on Ukraine and Russia, fears of falling fuel demand in China after the closure of the financial center Shanghai due to the increase in COVID-19 cases emerged and oil increased its losses compared to the previous day.
Brent crude futures were trading at $111.30 a barrel, down $1.18, or 1.1%, as of 0348 GMT, after falling as low as $109.97.
West Texas Intermediate (WTI) after falling to $103.46 in early trade, down $1.09 or 1.0% per barrel, to $104.87.
Both benchmark contracts lost about 7% on Monday.
Ukraine and Russia will meet today in Istanbul for their first peace talks in two weeks. Sanctions on Russia curtailed oil supplies and pushed prices to 14-year highs earlier this month.
Oil prices are again under pressure on expectations of easing sanctions on Russia or a peace talk that could ensure the West does not stay away from Russian oil.
Shanghai’s two-stage lockdown for nine days is expected to affect fuel demand in China, the world’s largest oil importer. The country’s financial center, Shanghai, is said to account for about 4% of China’s oil consumption.
Selling pressure has increased amid concerns that China may impose more restrictions elsewhere to contain the pandemic and fuel demand could slacken further.
Short-term investors tend to take profits or cut losses faster than before. Increasing market volatility makes it difficult for long-term investors to engage.
The market also awaits the meeting scheduled for Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Some sources close to the group said the group will stick with its plans with only a modest increase in oil production in May, despite the rise in prices due to the Ukraine crisis and requests for more supplies by the US and other consumers.
Worldwide demand has risen to nearly pre-pandemic levels, but the targets are not being met as OPEC+ fell short in 2020 to compensate for the supply cuts enacted during the pandemic.
After the Russian invasion of Ukraine, U.S. oil exports increased, and the domestic product typically supposed to go to the Cushing, Oklahoma, landfill is exported directly via the Gulf Coast.