Crude Oil Falls Amid Russia-Ukraine Talk, COVID-19 Cases Surging In China

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Crude oil futures opened lower in Asian morning trades March 15 amid hopes of progress in Russian-Ukraine peace talks and as surging coronavirus cases in China shook investor confidence, says an article published in S&P Global.

Russia-Ukraine talk

At 11 am Singapore time (0300 GMT), the May ICE Brent futures contract was down $3.81/b (3.56%) from the previous close at $103.09/b, while the April NYMEX light sweet crude contract fell $3.83/b (3.72%) to $99.18/b.

Russian and Ukrainian negotiators met for a fresh round of talks on March 14, following comments from both sides over the weekend that suggested the gap between their respective positions had narrowed.

Ukraine President Volodymyr Zelensky sounded upbeat on the progress of the Russian-Ukraine talks, describing it as “pretty good” in his address to the nation on March 15.

Worsening pandemic situation

Investors are now focused on China’s worsening pandemic situation, with Jilin province and Shenzhen city going into lockdowns as the country pursues its ‘zero-COVID policy’.

“On the demand side, the market is also having to assess the potential impact of China’s latest COVID outbreak. China is seeing its highest number of daily cases in two years,” Warren Patterson, an analyst at ING, wrote in a note on March 15. “Shenzhen is under lockdown at the moment, whilst other cities have also introduced tougher restrictions.”

“Sentiment weakened after authorities in China locked down the city of Shenzhen amid a COVID-19 wave. The restrictions are likely to see oil demand weaken in coming weeks,” Brian Martin, an analyst at ANZ, said in a note on March 15.

Middle East market

In the Middle East crude market, market sentiment eased, as reflected by the Dubai swap values and the Brent-Dubai EFS spread.

At 11 am Singapore (0300 GMT), the May Dubai swap was pegged at $92.99/b, down from $98.78/b at the Asia close March 14, data showed.

The May EFS also narrowed sharply and was pegged at 10.10/b, down from $11.46/b at the close the previous day.

The EFS, or Exchange of Futures for Swaps, is often tracked as an indicator of North Sea low sulfur crude value versus the Middle East high sulfur crude, and a wider EFS makes crude priced against Dubai more economically attractive compared to Brent-linked ones.

With India buying Russian crude, tightness in the Middle East crude market continues to soften, though market participants eye interest for May-loading spot cargoes from the region this week.

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Source: S&P Global

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