Oil slumped as Russia said it was taking steps to “de-escalate” the conflict in Ukraine, while floating the possibility of a meeting between President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskiy.
Futures in New York fell more than $7, briefly dropping below $100 a barrel before pairing some losses in the latest sequence of huge swings across the oil market. Moscow said it would sharply cut military operations near the Ukrainian capital of Kyiv, though troops had already been bogged down there for weeks.
Russia’s chief negotiator said there is a willingness to consider a presidential meeting between Putin and Zelenskiy. Kyiv has long sought direct talks, while Moscow had resisted committing to Putin’s participation.
“Fundamental traders and investors have taken their chips off the table in crude due to extremely high volatility, leaving the primary players in the market to be traders looking to hedge geopolitical risks,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.
Developments with the war in Ukraine and ensuing sanctions against Russia have caused extreme price gyrations in the oil market, leaving investors wary of trading. For the month of March, WTI has fluctuated on average over $9 per session, yet another indication of the liquidity issues currently facing the market.
Prices were also softer Tuesday as China grapples with its biggest Covid outbreak since the pandemic began. The latest restrictions in Shanghai could lower oil demand by up to 200,000 barrels a day for the duration of the restrictions, consultant Rystad Energy said in a report.
“We are still in a $100 environment, no question,” said Paul Sankey of Sankey Research in NYC on Bloomberg TV. “China is taking heat out of the market, but if the heat comes back, that adds $10” a barrel.
- WTI for May delivery fell $3.35 to $102.61 at 10:45 a.m. in New York
- Brent for May settlement lost $3.76 to $108.72 a barrel
Crude has largely traded above $100 a barrel since Moscow invaded Ukraine as concern built that supply from one of the world’s largest producers will be disrupted. Oil majors including Shell Plc and TotalEnergies SE have already announced plans to eventually stop trading Russian oil and the value of the nation’s barrels has plunged.
- Saudi Arabia and the United Arab Emirates said the U.S. must trust OPEC+’s strategy, as Washington and other major importers call on the group to hike oil production following Russia’s invasion of Ukraine.
- Saudi Arabia, the largest oil exporter, will likely boost pricing of its main crude variety to a record as the impact of Russia’s invasion of Ukraine reverberates through markets more than a month after the assault.
- Saudi Arabia’s foreign direct investment reached its highest level in more than a decade last year, seeing a sharp upswing thanks mainly to an oil pipeline deal in the second quarter.