Oil prices dip on Tuesday, extending losses from the previous day, as Ukraine and Russia prepared for peace negotiations, as well as concerns over a decline in gasoline consumption in China following the financial center of Shanghai’s closure to combat a rise of Covid-19 infections.
At 0348 GMT, Brent oil LCOc1 futures were down $1.18, or 1.1 percent, at $111.30 a barrel, after falling as low as $109.97.
In early trading, US West Texas Intermediate (WTI) crude CLc1 futures touched a low of $103.46 and were trading at $104.87, down $1.09, or 1.0 percent. On Monday, both benchmark futures fell roughly 7%.
In Istanbul, Ukraine and Russia were scheduled to meet on Tuesday for their first peace talks in over two weeks. Sanctions imposed on Russia after it invaded Ukraine have curtailed oil supply and earlier this month sent prices to 14-year highs.
Russia’s efforts in Ukraine are described as a “special operation” aimed at disarming its neighbor.
“Oil prices are under pressure again on anticipation of a peace deal between Ukraine and Russia, which might lead to a relaxation of sanctions or a boycott of Russian oil by the West,” said Nissan Securities’ general manager of research Hiroyuki Kikukawa.
“A successful truce may potentially rekindle hopes for a nuclear agreement with Iran,” he added.
Shanghai’s two-stage shutdown, which will last nine days, is projected to impact gasoline consumption in China, the world’s top oil importer, counteracting supply worries. According to ANZ Research experts, China’s financial centre accounts for around 4% of the country’s oil consumption.
“Selling pressure grew on concerns that China may impose more restrictions in other places to contain the pandemic and fuel demand may be reduced further,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
“Increased market volatility has made it difficult for long-term investors to participate, as short-term investors tend to take profits or cut losses more quickly than before,” he added.
The market is also waiting on a planned meeting on Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+.
The group will likely stick to plans for a modest increase in oil output in May, several sources close to the group said, despite a surge in prices due to the Ukraine crisis and calls from the United States and other consumers for more supply.
Worldwide demand has risen to nearly pre-pandemic levels, but supply has been hindered, as OPEC+ has been slow to restore supply cuts enacted during the pandemic in 2020.
US oil exports have climbed after Russia’s invasion of Ukraine, and barrels of domestic oil that would typically go to the Cushing, Oklahoma, storage hub are instead being exported via the Gulf Coast, traders said.