January 31, 2023

Oil falls due to talks to end the war in Ukraine and before the Federal Reserve meeting

Oil falls due to talks to end the war in Ukraine and before the Federal Reserve meeting

A customer fills his car with diesel at a gas station in Nice, March 4, 2013. REUTERS/Eric Gillard

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  • Oil prices drop by $4 a barrel
  • Oil may continue to moderate, focus shifts to Fed meeting – Analyst
  • Rising COVID cases in China, a major oil consumer, raises demand concerns – Analyst

BEIJING (Reuters) – Oil prices fell as much as $4 a barrel on Monday, extending last week’s slide, as diplomatic efforts to end the war in Ukraine intensified and markets prepared for a hike in U.S. interest rates.

Brent crude futures were last down $3.81, or 3.4 percent, at $108.86 a barrel at 0741 GMT on Monday.

US West Texas Intermediate crude futures fell $3.85, or 3.5%, to $105.48 a barrel.

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Both decades have risen since Russia invaded Ukraine on February 24, and are up nearly 40% in the year so far.

Ukrainian and Russian negotiators are scheduled to speak again on Monday via video link after both sides indicated progress. Read more

The negotiators gave their most optimistic assessments after the weekend negotiations, indicating that there could be positive results within days. Read more

On Sunday, US Deputy Secretary of State Wendy Sherman said Russia was showing signs that it might be willing to conduct substantive negotiations on Ukraine, while Ukrainian negotiator Mikhailo Podolyak said Russia had “begin constructive talks”.

The Russian invasion, which Moscow calls a “special operation,” has disrupted energy markets globally.

“Oil prices may continue to slide this week as investors digest the impact of sanctions on Russia, along with the parties showing signs of negotiating a ceasefire,” said Tina Ting, analyst at CMC Markets.

“With markets preparing for much lower supplies from February to early March, focus is shifting to monetary policy at the upcoming FOMC meeting this week, which could boost the dollar further and put pressure on commodity prices,” Teng added.

The US Federal Open Market Committee meets on March 15-16 to decide whether or not to raise interest rates.

US consumer prices rose in February, leading to the largest annual increase in inflation in 40 years, and are set to accelerate further as Russia’s war against Ukraine pushes up the costs of crude oil and other commodities. Read more

The Federal Reserve is expected to start raising interest rates this week, which will put downward pressure on oil prices. Oil prices usually move inversely to the US dollar, with the US dollar rising making commodities more expensive for foreign exchange holders.

Brent actually lost 4.8% last week and US WTI fell 5.7%, both posting their biggest weekly drops since November. This came after both contracts reached their highest levels since 2008 earlier in the week due to supply concerns after the United States and its European allies considered banning Russian oil imports.

The United States later announced a ban on Russian oil imports, and Britain said it would phase out them by the end of the year. Russia is the world’s largest exporter of crude and oil products combined, shipping about 7 million barrels per day or 7% of global supplies.

“The situation between Russia and Ukraine is very fluid and the market will be sensitive to developments on this front. Suggestions that the parties may be willing to negotiate prices are likely to affect to some extent,” said Warren Patterson, head of commodity research at ING.

“In addition, rising COVID cases in China will raise demand concerns. China is experiencing the worst spread of COVID in more than two years. Shenzhen has been locked down, while other cities are seeing tighter restrictions.”

China, the world’s largest importer of crude oil and second largest consumer after the United States, is seeing a rise in COVID-19 cases, as the transmissible Omicron variant spreads to more cities, leading to an outbreak from Shanghai to Shenzhen.

Daily new case load numbers reached their highest level in two years, with 1,437 new confirmed cases of coronavirus reported on March 13. read more

While the number of cases in China is significantly lower than in many other countries, its “zero COVID” stance has prompted government authorities in affected regions to impose targeted closures, conduct mass testing, close schools and suspend public transportation to quell infection as quickly as possible. . Read more

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Additional reporting by Stephanie Kelly in New York. Editing by Edwina Gibbs and Jacqueline Wong

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