Oil drops on Russia and Ukraine talks, US stockpile data

Oil storage containers are seen amid the coronavirus (COVID-19) pandemic, in Los Angeles, California, US, April 7, 2021. REUTERS/LUCY NICHOLSON/FILES

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  • Russia says some deals with Ukraine are on the verge of agreement
  • New locally transmitted COVID-19 cases in China nearly halved
  • The International Energy Agency cuts its forecast for oil demand growth in 2022
  • EIA figures show a bigger than expected bump in stocks

March 16 (Reuters) – Oil fell off the ground for the fifth time in the past six days on Wednesday as traders reacted to hoped-for progress in peace talks between Russia and Ukraine and a surprise build in US inventories.

The oil market has been in a downturn for more than two weeks, and both major benchmarks have traded in their largest range from high to low over the past 30 days more than at any time since mid-2020.

Wednesday was no different, with global benchmark Brent crude trading in the $6 range, between $97.55 and $103.70 before settling at $98.02, down $1.89 a barrel, or 1.9%. US West Texas Intermediate crude closed down $1.40, or 1.5%, at $95.04 a barrel.

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Last week’s frenetic rally pushed Brent to briefly surpass $139 a barrel on fears of an extended disruption to Russian supplies. Brent crude is now down more than $40 from that point, and some analysts have warned that this reflects a lot of optimism that the war will soon be over.

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The United States and other countries have imposed severe sanctions on Russia since it invaded Ukraine more than two weeks ago. This has disrupted the Russian oil trade of more than 4-5 million barrels of crude oil per day.

Brent crude was up 28% in six days, then fell by 24% over the next six sessions from Wednesday. Prices hit a 14-year high on March 7 before pulling back.

A number of factors led to this shift, including modest hopes for a peace deal between Russia and Ukraine and weak signs of progress between the United States and Iran to revive a 2015 agreement that would allow the Islamic Republic to export oil if it agreed to limit its nuclear program. ambitions.

Chinese demand is expected to slow due to an increase in coronavirus cases there, although figures showed fewer new cases and Chinese stimulus hopes boosted stocks.

“Going forward from here, we’re looking forward to headlines regarding negotiations in Russia, a ceasefire or withdrawal, or the spread of COVID in China,” said Robert Yoger, director of energy futures at Mizuho.

The International Energy Agency said on Wednesday that if the war continues, more supplies will be disrupted. The International Energy Agency said that three million barrels per day of Russian oil and products may not find their way to the market starting in April, given the impact of sanctions and delaying buyers. The IEA also said that demand will fall, but not as much as a possible drop in Russian supplies.

US stocks rose by 4.3 million barrels, against expectations of a loss, while stocks in the Cushing Center, Oklahoma, also rose, easing a bit of concern about the low level of stocks there.

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The Federal Reserve raised US interest rates for the first time in three years, boosting the federal funds rate by a quarter of a percentage point, as expected. The fundamental path of the oil market has not changed after the news.

Signs of progress in peace talks between Russia and Ukraine added to the bearish tone. The Ukrainian president said that the positions of Ukraine and Russia seemed more realistic, but time was required. The Russian foreign minister said some deals with Ukraine were on the verge of agreement. Read more

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Additional reporting by Emily Chow. Editing by Barbara Lewis, Louise Heavens, David Gregorio, Tim Ahmann and Jonathan Otis

Our criteria: Thomson Reuters Trust Principles.

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