New York (awp/afp) – Oil prices continued to fall on Wednesday, approaching their level before the Russian military invasion of Ukraine, weighed down by fears of a slowdown in demand for black gold, on background of optimism about the ceasefire talks between Moscow and Kyiv.
At the end of a very volatile session, a barrel of Brent from the North Sea for delivery in May dropped 1.89% to end at 98.02 dollars.
A barrel of West Texas Intermediate (WTI) for April delivery fell 1.49% to $95.04.
The two references are thus evolving well below the 100 dollar mark and not far from their price levels before the entry of the Russian army into Ukraine on February 24 and the Western sanctions that followed, which had jump the price of black gold.
“These moves follow the hopes and expectations raised by developments between Russia and Ukraine,” said Matt Smith, head of oil analysis at Kpler.
New talks between kyiv and Moscow have been described by Ukrainian President Volodymyr Zelensky as “more realistic”, even if Russia continues to tighten its grip.
The offensive and the determination of the two camps did not prevent the continuation of parallel talks, relaunched on Monday by videoconference at the level of the delegations.
Kremlin spokesman Dmitry Peskov said on Wednesday that negotiators were now discussing “a compromise”, which would make Ukraine a neutral country, on the model of Sweden and Austria.
“There are very concrete formulas which, I think, are close to an agreement”, also launched the head of Russian diplomacy, Sergei Lavrov.
Given the drop in prices, “investors seem to be putting a lot of weight in these neutrality plans, but I would advise extreme caution on this subject”, warned analyst Matt Smith.
According to him, crude prices should once again resume their ascent as we prepare to face a lack of supply.
“In theory, there will be a lack of supply in the next two weeks”, which should push prices up again, he assured.
After the invasion and the massive salvo of Western sanctions, the purchases of Russian oil have slowed down, “not to mention that there is a time lag between what has been bought and what we will see delivered”, has explained the analyst.
The International Energy Agency (IEA) also said on Wednesday that it feared a “shock” on world oil supply, following sanctions against Russia taken after its invasion of Ukraine.
Russia is the second largest crude oil exporter in the world.
For Stephen Brennock, analyst at PVM Energy, other factors are pulling oil down, such as “fears linked to Covid-19 come back in force”, or even “renewed hope for a breakthrough in the negotiations on Iran’s nuclear”.
China is currently facing its worst outbreak of the coronavirus since the beginning of 2020. A sanitary confinement has been decreed in several Chinese cities, leaving investors to fear a slowdown in the country’s economy, and therefore a drop in demand for gold. black.
In addition, obstacles to reviving the Iran nuclear deal appear to have been lifted, according to statements from Russia on Tuesday.
The United States has judged that a compromise was “close” to save this agreement, which would lead to the lifting of sanctions against Iran, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), and allow its return at full export capacity in the oil market.
Finally, data on weekly US crude oil inventories, which swelled much more than expected (+4.3 million barrels), were not likely to support prices.
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