14 March 2022 12:39 (UTC+04:00)
Oil prices fell as low as $4 a barrel on Monday, extending last week’s slump as diplomatic efforts to end the war in Ukraine are stepped up and markets prepare for higher US rates. Flow reports by reference Reuters.
Brent crude futures were last trading at $109.62 a barrel, down $3.05, or 2.7%, at 0351 GMT on Monday.
US West Texas Intermediate (WTI) crude futures fell $3.10, or 2.8%, to $106.23 a barrel.
Russia and Ukraine made their most optimistic assessments after the weekend negotiations, claiming that positive results could be achieved within a few days.
“Oil prices may continue to moderate this week as investors digest the impact of sanctions on Russia and the parties show signs of negotiations to quell the fire,” said Tina Teng, analyst at CMC Markets.
“As markets price for a much tighter supply from February to early March, the focus is shifting to monetary policy at this week’s FOMC meeting, which could further strengthen the USD and put pressure on commodity prices,” Teng said.
The US Federal Open Market Committee will meet on March 15-16 to decide whether to raise interest rates.
US consumer prices soared in February, causing the highest annual rise in inflation in 40 years and is poised to accelerate further.
The Federal Reserve is expected to start raising interest rates this week, which will put downward pressure on oil prices. Oil prices typically move inversely with the US dollar, and a stronger US dollar makes commodities more expensive for foreign currency holders.
Brent has already lost 4.8% last week and US WTI is down 5.7%, both posting their steepest weekly declines since November. This was after both contracts hit their highest levels since 2008 earlier in the week amid supply concerns after the US and European allies considered banning Russian oil imports.
The US later announced that it was banning Russian oil imports, and the UK said it would phase them out by the end of the year. Russia is the world’s largest exporter of crude and petroleum products, shipping around 7 million barrels per day, or 7% of the global supply.
“The Russia-Ukraine situation is very volatile and the market will be sensitive to developments on this front. Proposals that the parties may be willing to negotiate probably weigh some on prices,” said Warren Patterson, head of commodity research at ING.
“Also, rising COVID cases in China will raise concerns about demand. China is experiencing the worst COVID outbreak in more than two years. The city of Shenzhen is under quarantine while other cities are seeing tougher restrictions.”
China, the world’s largest importer of crude oil and its second-largest consumer after the United States, is seeing an increase in COVID-19 cases, with new daily caseload figures hitting two-year highs. It last reported 1,437 new confirmed cases of coronavirus on March 13.
While China’s number of cases is much lower than in many other countries, its “zero-COVID” stance has prompted government officials in affected areas, such as southern tech hub Shenzhen and northeastern province Jilin, to impose targeted lockdowns, conduct mass testing and suspend the public. transport to suppress contamination as quickly as possible.
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