Oil volatile with stalemate in Russia-Ukraine talks, rise in demand risks

ANKARA

Oil prices fluctuated on Wednesday following the deadlock in peace talks between Russia and Ukraine, while weakening demand in China limited further price upticks.

International benchmark Brent crude cost $104.47 per barrel at 0708 GMT for a 0.16% decrease after closing the previous session at $104.64 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $100.42 per barrel at the same time for a 0.18% loss after the previous session closed at $100.60 a barrel.

Brent prices swung widely after settling at $98.90 a barrel on Wednesday but later rose to $105.60 a barrel with growing supply and demand uncertainties.

Escalating geopolitical tension in Eastern Europe is triggering concerns of large oil supply shortages, while China’s zero-tolerance policy on COVID cases, which saw a lockdown extension to the 14 days already in place, contributed to demand-side risks.

Russian President Vladimir Putin on Tuesday said Ukraine had changed its stance from peace talks in Istanbul last month, declaring that the talks are now at a “dead end.”

Russia, a significant crude oil producer, has been subjected to sanctions imposed by the US and other European countries, which have affected supplies in an already tight global market.

Meanwhile, the ongoing but partially eased lockdown and uncertainties over its duration continue to put downward pressure on oil prices.

Blunting the price momentum, the American Petroleum Institute (API) announced late Tuesday its estimate of over a 7.75 million-barrel increase in US crude oil inventories, relative to the market expectation of a rise of 1.4 million barrels.

The predicted increase in stockpiles signals a drop in crude demand in the US, the world's top oil consumer.

In the April Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) found that numerous energy supply uncertainties, including the conflict in Ukraine, the production decisions of OPEC+, and the rate at which US oil and natural gas producers are increasing drilling would impact price uncertainties for the rest of the year.

According to the statistics agency, the degree to which other oil producers respond to current oil prices, as well as the effects that macroeconomic developments might have on global oil demand, would also be important for oil price formation in the coming months.