By Adedapo Adesanya
Oil prices continued southwards on Tuesday as talks progressed between Russia and Ukraine as both parties look to end their month-long conflict.
Brent crude lost 1.1 per cent or $1.24 to sell at $111.2 per barrel while the United States West Texas Intermediate (WTI) depreciated by 1.62 per cent to trade at $104.2 per barrel.
Ukrainian and Russian negotiators met in Turkey for the first face-to-face discussions in nearly three weeks.
The market reacted after the top Russian negotiator said the talks were constructive and promised to reduce its military operations around Kyiv and northern Ukraine.
On its part, Ukraine proposed it would keep a neutral status and would not join alliances or host troops of other countries on its territory. Ukraine, however, wants international security guarantees to keep it from attacks.
According to Reuters, the leading Russian negotiator Vladimir Medinsky said he would review Ukraine’s proposals and report on them to Russian President Vladimir Putin.
Hopes of peace sent oil prices plummeting early on Tuesday, although it’s unclear whether sanctions against Russia could be removed anytime soon.
Sanctions imposed on Russia over its invasion of Ukraine have disrupted oil supplies, driving prices higher but they have since eased.
Prices also came under pressure after new lockdowns in Shanghai to curb rising coronavirus cases hit fuel demand in China, the world’s biggest importer.
Shanghai accounts for about 4 per cent of China’s oil consumption and lockdowns have dampened consumption of transportation fuels in China to a point where some independent refiners are trying to resell crude purchased for delivery over the next two months.
Analysts note that there are indications of weakness in global oil demand is expected to persist through April and May due to the three-pronged effects of Russia-Ukraine tensions, high oil prices and China’s COVID-19 situation.
The American Petroleum Institute (API) estimated that there was a draw this week for crude oil of 3.0 million barrels, compared to analyst predictions of a 1.558 million barrel draw.
U.S. crude inventories have shed some 80 million barrels since the start of 2021 and about 23 million barrels since the start of 2020.
In the week prior, the API reported a draw in crude oil inventories of 4.28 million barrels after analysts had predicted a build of 25,000 barrels.
Official Government inventory data from the US Energy Information Administration (EIA) is due on Wednesday.
Also, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) is expected to stick to its plan for a modest output rise in May despite high prices and calls from the United States and other consumers for more supply.
Dipo Olowookere