Oil retreats near US$104 with focus on Ukraine-Russia talks

Oil declined as Ukranian and Russian negotiators embarked on a further round of talks.

Oil declined as Ukranian and Russian negotiators embarked on a further round of talks, after Ukraine’s president said over the weekend that discussions with Moscow showed some signs of becoming more substantive.

Futures in New York fell about 5 per cent to trade near US$104 a barrel. The war in Ukraine has roiled commodity markets from crude to grains, leading to buyers shunning Russian oil as they navigate sanctions. 

A further round of talks between Russian and Ukrainian officials on Monday will focus on discussing a potential ceasefire with an immediate withdrawal of troops and security guarantees, Ukraine negotiator Mykhailo Podolyak said, though he called it a “hard discussion.” Moscow at the weekend stepped up its bombardment of western areas close to the border with Poland. Senior American and Chinese officials were meeting as the U.S. seeks to enlist China to help end the invasion.

There are also some risks to demand. China placed 17.5 million people in Shenzhen under a lockdown for at least a week amid a surge in COVID-19 infections, and told people in Jilin province not to travel, the first time the country has sealed off an entire region since April 2020. 

“Crude oil trades lower, but still within last week’s record wide trading range after Ukraine’s president said talks with Moscow show signs of becoming more substantive,” said Ole Hansen, head of commodities strategy at Saxo Bank. China’s latest lockdowns “should help cool prices given its potential impact on demand,” he added. 

There’s a flurry of diplomatic efforts to try and stop the war. A top adviser to Ukraine’s President Volodymyr Zelenskiy said “continuous” discussions with Russia are under way by video, while Russian President Vladimir Putin engaged with his French and German counterparts after they talked with Zelenskiy. U.S. Secretary of State Antony Blinken also spoke with Ukraine’s foreign minister.