Oil futures pulled back to start the week as traders looked for signs of progress in talks between Russia and Ukraine and focused on a surge in COVID-19 cases in China.
- West Texas Intermediate crude for April delivery CL.1, -6.73% CL00, -6.73% CLJ22, -6.73% fell $7.06, or 6.4%, to $102.27 a barrel on the New York Mercantile Exchange.
- May Brent crude BRN00, -6.51% BRNK22, -6.51%, the global benchmark, dropped $6.78, or 6%, to $105.89 a barrel on ICE Futures Europe. WTI last week briefly traded above $130 a barrel, while Brent neared $140 before pulling back as volatile trading conditions continued.
- April natural gas NGJ22, -3.11% traded at $4.696 per million British thermal units, down 0.6%.
- April gasoline RBJ22, -5.33% declined by 4.6% to $3.158 a gallon and April heating oil HOJ22, -4.40% lost 4% to $3.281 a gallon.
A fourth round of talks between Russian and Ukraine officials were under way Monday, stoking optimism among investors, helping lift European equities, though U.S. benchmark stock indexes saw mixed trading on Wall Street.
The moves come as a brutal weekend of fighting in Ukraine that saw Russian forces intensify their attacks on cities. An airstrike on a Ukrainian military training facility near the border with Poland, a NATO member, killed 35 people a day after Moscow warned that it would consider arms shipments as legitimate targets.
“The escalating tensions in Ukraine, and the negative pressure in oil prices is in play” since the failure to break above the $130 mark in oil prices following the U.S. and the U.K.’s announcement of a ban on Russian oil last week, said Ipek Ozkardeskaya, senior analyst at Swissquote. That price action suggests “last week’s highs factored in a major part of the bad news before they were announced,” he said, noting that oil prices may see further declines and the $95 to $100 levels should be closely monitored.
China, meanwhile, moved to lock down the key southeastern manufacturing hub of Shenzhen as it combats a COVID outbreak in the northeast of the country.
The market could be focusing more on the latest COVID developments in China, said Warren Patterson, head of commodities strategy at ING, in a note.
“This will raise concern over the potential hit to demand. But also importantly, it suggests that China is not ready to let go of its zero-COVID policy,” he said.
Meanwhile, The Wall Street Journal reported Sunday that Washington won’t negotiate exemptions to Ukraine-related sanctions on Russia to restore the 2015 Iran nuclear deal and could attempt to reach a separate agreement that excludes Moscow. Russia, which is part of the talks around the nuclear accord, has insisted on exemptions to Ukraine-related sanctions that would allow it to trade with Iran if the deal is revived.