Crude futures in the United States dipped on Tuesday, extending losses from the previous day, as Ukraine and Russia headed for peace talks and on worries of a decline in fuel consumption in China after the financial hub of Shanghai shut down to combat a spike of COVID-19 cases.
Brent crude futures were down $1.07, or 1.0%, at $111.41 a barrel, after falling as low as $109.97. WTI crude futures in the United States fell to a low of $103.46 in early trade and were down 79 cents, or 0.8%, at $105.17. On Monday, both benchmark futures fell roughly 7%.
Ukraine and Russia were scheduled to meet in Istanbul on Tuesday for the first time in over two weeks for peace talks. Sanctions imposed on Russia following its invasion of Ukraine have reduced oil supplies, sending prices to 14-year highs earlier this month. Russia refers to its operations in Ukraine as a “special operation” aimed at disarming its neighbour.
“Oil prices are under pressure again on expectations for a peace talk between Ukraine and Russia, which could lead to an easing of sanctions or avoidance on Russian oil by the West,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“A successful ceasefire could also raise the prospect of reviving an Iranian nuclear deal,” he added.
To offset supply worries, Shanghai’s two-stage lockdown over nine days is likely to impact fuel demand in China, the world’s top oil importer. According to ANZ Research, the country’s financial centre accounts for around 4% of China’s oil consumption.
The market is also eyeing a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, on Thursday.
Global consumption has almost rebounded to pre-pandemic levels, but supply has been hampered since OPEC+ has been hesitant to reverse supply curbs implemented during the pandemic in 2020.