Oil prices fall further on ceasefire talks, Covid-19 cases in China

TOKYO • The heat is coming out of the oil market, and fast.

Crude prices extended losses yesterday, 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 crude fell below US$100 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 on Monday.

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 after 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 Fujitomi Securities analyst Toshitaka Tazawa. "Fresh lockdowns to curb the Covid-19 pandemic in China also raised concerns over slower demand."

China posted a steep jump in daily Covid-19 infections yesterday, 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 yesterday after discussions on Monday ended with no new progress announced.

United States President Joe Biden is expected to travel to Brussels next week to meet North Atlantic Treaty Organisation leaders to discuss the crisis, US and foreign sources 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 NLI Research Institute senior economist Tsuyoshi Ueno. "Still, the recent fall in the oil market comes as some investors unwound their long positions as they became... worried about recent volatility."

The voluntary shunning of Russian commodities by Western buyers, or self-sanctioning, was expected to start hitting exports of crude oil, liquefied natural gas and coal from next month, but there are already signs that flows are weakening.

REUTERS, BLOOMBERG