Oil prices dip below $100 per barrel as Ukraine-Russia draw up neutrality plan
Brent Crude prices plunged below $100 per barrel again today, media reports Russia and Ukraine have made progress on a 15-point peace plan.
The reports – first published in the Financial Times – have caused Brent Crude to drop 0.69 per cent to $99.22 per barrel, while WTI Crude is treading water at $96.69 with a 0.25 per cent increase over the course of the session.
Prices spiked earlier this month to 14 year highs of $139 per barrel, after the US and UK imposed oil sanctions on Russia following its invasion of Ukraine – intensifying fears of supply shortages and conflict-driven disruption.
Rallies across both Brent Crude and WTI benchmarks have subsequently subsided with the market weighed down by multiple geopolitical developments in recent days.
This includes surging Covid-19 cases across China, which has cut down demand, while the prospect of a US-Iran deal and now the possibility of reduced conflict in Ukraine has eased fears of supply shortages.
Meanwhile, the IEA has cut its demand forecast in its first oil report since Russia invaded Ukraine – however it has also reported that 3m barrels could be lost from the market following Russian sanctions with potential shortages next quarter.
Craig Erlam, senior market analyst at OANDA said: “Oil prices are continuing to fall in the middle of the week as progress in talks between Ukraine and Russia see crude premiums being eroded. Whether that’s premature or not, we’ll soon see, especially with disruptions already being reported in recent weeks.”
Commerzbank analyst Carsten Fritsch considers the current slump to be an over-correction, especially with disruption between Russian markets and the rest of the world likely to remain in place for some time.
He explained: “If Brent’s massive upswing to $140 a week ago was exaggerated, so too is its slump now. After all, any peaceful resolution of the war in Ukraine is still a long way off, as the images we see in the news each day should make abundantly clear. The sanctions against Russia are also likely to remain in place for quite some time after the war, deterring many consumers from buying Russian oil.”
Prime Minister Boris Johnson has travelled to the Gulf and has already held talks with the UAE to boost supplies.
He is set to meet Saudi Arabian authorities later today.
OPEC+ has failed to reach raised output production targets this year and has resisted calls from the West to further boost production, but there are signs of fracturing in its position.
Libyan Prime Minister Abdul Hamid Dbeibah has demanded OPEC+ increases production targets, while the UAE has also suggested there could be room to raise oil supplies.