Oil drops $2 on positive signals from Russian-Ukrainian peace talks

Storage tanks are seen at Marathon Petroleum’s Los Angeles refinery, which processes domestic and imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel and other petroleum products, in Carson, California, USA , March 11, 2022. Photo taken with a drone. REUTERS/Bing Guan

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  • Ukraine and Russia continue peace talks
  • Russia says talks are constructive, but there’s ‘a long way to go’
  • Shanghai lockdown set to hit Chinese oil demand
  • Pipeline failure forces Kazakhstan to cut production by a fifth
  • OPEC+ expected to stick to modest production increase

HOUSTON, March 29 (Reuters) – Oil prices fell $2 on Tuesday as talks progressed between Russia and Ukraine to end their week-long dispute, despite Moscow negotiators saying that a promise to reduce certain military operations did not constitute a ceasefire.

Weighing further on oil futures, new lockdowns in China to curb the spread of the coronavirus have raised fears that fuel demand could be hit.

Brent crude settled $2.25, or 2%, at $110.23 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.72, or 1.6%, at $104.24.

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Each benchmark fell 7% on Monday and fell another 7% early Tuesday before bouncing off session lows.

Ukrainian and Russian negotiators met in Turkey for the first face-to-face talks in nearly three weeks. Russia’s chief negotiator said the talks were “constructive”.

Russia has promised to reduce its military operations around kyiv and northern Ukraine; Ukraine proposed the adoption of a neutral status but with international guarantees that it would be protected against attacks. Read more

Oil hit its lowest level as Moscow’s chief negotiator warned that Russia’s promise to scale back military operations did not represent a ceasefire and that a formal deal with kyiv still had a long way to go to browse. Read more

“Maybe there’s reason to be a bit more optimistic than we were this time around yesterday, but I don’t think this whole situation with Ukraine is going to go away in the next 15 minutes. “warned Robert Yawger, executive director of energy futures at Mizuho.

Sanctions imposed on Russia following its invasion of Ukraine had disrupted oil supplies and pushed oil prices to nearly $140 a barrel, their highest level in about 14 years. Read more

Further shutdowns in Shanghai to curb rising coronavirus cases also put pressure on prices on Tuesday as the market worried about a drop in Chinese demand. Shanghai accounts for about 4% of China’s oil consumption, analysts at ANZ Research said. Read more

The lockdowns have dampened consumption of transportation fuels in China to such an extent that some independent refiners are trying to resell purchased crude for delivery over the next two months, traders and analysts said.

“China’s zero COVID policy is bringing some relief to the oil market, albeit unintentionally, which is very tight due to supply cuts from Russia,” said Commerzbank analyst Carsten Fritsch.

Weakness in global oil demand is expected to persist in April and May, said Rystad Energy’s senior vice president of analysis Claudio Galimberti, citing Russian-Ukrainian tensions, high oil prices and the COVID situation. -19 in China.

Early in the session, oil prices rose nearly $2 on continued disruption to supplies from Kazakhstan and as major producers showed no signs of rushing to significantly increase production.

Kazakhstan is expected to lose at least a fifth of its oil production for a month after the storm caused damage to berths used to export Caspian Pipeline Consortium (CPC) crude, the energy ministry said.

The OPEC+ producer group is expected to stick to its plan for a modest increase in output in May despite high prices and calls from the United States and other consumers for more supply. Read more

Energy ministers from key members Saudi Arabia and the United Arab Emirates have said OPEC+ should not engage in politics as pressure mounts on them to take action against the Russia following its invasion of Ukraine. Read more

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Reporting by Yuka Obayashi in Tokyo and Bozorgmehr Sharafedin in London Additional reporting by Sonali Paul in Melbourne Editing by David Goodman, Bernadette Baum, David Gregorio and Jonathan Oatis

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