TOKYO (REUTERS, BLOOMBERG) - The heat is coming out of the oil market, and fast.
Crude prices extended losses on Tuesday (March 15), with US crude diving below US$100 a barrel, as ceasefire talks between Russia and Ukraine eased fears of further supply disruptions and spreading Covid-19 lockdowns in China fuelled concerns about slower demand.
US West Texas Intermediate (WTI) crude fell below US$100 level for the first time since March 1, dropping US$5.49 or 5.3 per cent to US$97.52 a barrel by 3.45pm Singapore time. It fell to as low as US$96.70 earlier in the session.
Brent futures dropped US$5.95 or 5.6 per cent to US$100.95.
Both benchmarks declined by more than 5 per cent the previous day.
Brent has lost nearly US$40 since hitting a 14-year high of US$139.13 a barrel on March 7. US crude has fallen more than US$30 since touching its highest since 2008 of US$130.50 a barrel about a week ago.
“Expectations of positive developments in the Russia-Ukraine ceasefire talks bolstered hopes to ease tightness in the global crude market,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.
“Fresh lockdowns to curb the Covid-19 pandemic in China also raised concerns over slower demand,” he said.
China posted a steep jump in daily Covid-19 infections on Tuesday, with new cases more than doubling from a day earlier to hit a two-year high, raising concerns about the rising economic costs of the country’s tough containment measures.
Further talks between Ukrainian and Russian negotiators to ease the crisis were expected on Tuesday after discussions on Monday via video ended with no new progress announced.
US President Joe Biden is expected to travel to Brussels next week to meet with Nato leaders to discuss Russia’s war in Ukraine, US and foreign sources familiar with the situation said on Monday.
“Even if there is a ceasefire, oil prices are expected to remain at high levels as Western attempts to isolate Moscow through sanctions will continue, keeping the global oil market in a tight condition,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
“Still, the recent fall in the oil market comes as some investors unwound their long positions as they became increasingly worried about recent volatility,” NLI’s Mr Ueno said.
The voluntary shunning of Russian commodities by Western buyers, or self-sanctioning, was expected to start hitting exports of crude oil, liquefied natural gas (LNG) and coal from April, but there are already signs that flows are weakening.
