By Barani Krishnan
Investing.com - Oil prices hit their lowest in two weeks, with U.S. crude briefly breaking the $100 per barrel support, on signs that diplomacy might actually win in the Russia-Ukraine war despite Moscow signaling no commitment to abort its intent to conquer the capital Kyiv.
Reports of new Covid-19 lockdowns in China’s Shenzhen and Jilin areas over ramping Omicron cases also stirred risk aversion among investors, many of whom had thought the pandemic to be over for all intent and purpose.
U.S. crude’s U.S. West Texas Intermediate crude, or WTI, benchmark settled down $6.32, or 5.8%, at $103.01 a barrel. It earlier fell to $99.83, its lowest since March 1. WTI had fallen a total of 21% since hitting 2008 highs of $130.50 on March 7. For the year though, the U.S. crude benchmark remains up 35%.
Brent, the global benchmark for oil, settled down $5.77, or 5.1%, at $106.90 a barrel. Earlier, Brent fell to $103.52, also its lowest since March 1. Brent has lost 24% since the post-Ukraine invasion high of $139.12. For the year though, it remains up 35%.
“Russia-Ukraine talks led to optimism that an end to the war could be in sight,” said Ed Moya, analyst at online trading platform OANDA.
He noted that some energy traders also abandoned the crude trade after it became obvious that the next round of EU sanctions will continue to spare Russian oil exporters.
“Oil prices did not stand a chance as Russian crude exports still seem protected, amid fears the short-term crude demand outlook will take a hit as China sticks to the 'zero-COVID policy',” Moya said. He, however, added that a ‘tight’ market for oil will keep prices from breaking below the mid-$90s.
Ukraine said on Monday it had begun "hard" talks on a ceasefire, immediate withdrawal of troops and security guarantees with Russia, despite the fatal shelling of a residential building in Kyiv.
Russia's output of oil and gas condensate rose to 11.12 million barrels per day so far in March, two sources familiar with production data told Reuters, despite sanctions.
The United States has announced a ban on Russian oil imports and Britain said it would phase them 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.
Adding to the weight on oil were headlines suggesting that the on-off possibility for an Iran nuclear deal was “on” again on Monday, with a U.S. official anonymously commenting that negotiators were “close to the finish line." A deal would end near four years of U.S. sanctions on Iran oil and return hundreds of thousands of barrels daily to a market starved of supply.