Oil Dips on US-Russia Talks Amidst Ukraine Conflict
Oil prices declined following a conversation between US President Donald Trump and Russian President Vladimir Putin. The discussion raised speculations of reduced risks to crude supplies in the region.
Trump announced an agreement to initiate negotiations aimed at resolving the conflict in Ukraine, a significant shift from previous US policy. West Texas Intermediate (WTI) crude plunged 2.7% to approximately $71 per barrel.
Ukraine developments prompted initial declines due to higher-than-anticipated US consumer price data, strengthening the dollar and diminishing the appeal of commodities priced in the currency.
A potential ceasefire between Russia and Ukraine questions the duration of US sanctions, which have recently impacted Russian crude flows. Several Pacific platforms face stranded barrels as shuttle tankers transporting them to China are now blacklisted.
However, the US Energy Information Administration stated that it anticipates no substantial impact on Russian production for the time being. Rebecca Babin, from CIBC Private Wealth Group, suggests that peace talks imply "a higher likelihood of sanctions being lifted or shortened."
Oil prices have declined over the past three weeks due to Trump's tariffs, which may trigger trade wars and reduce crude demand. OPEC warned that US trade policies could further destabilize the market. The International Energy Agency's monthly report is expected on Thursday.
US crude inventories increased by 4.07 million barrels last week, extending a three-week gain. Futures trimmed losses as the increase fell below the 9 million barrels anticipated by the American Petroleum Institute.
The WTI prompt spread, reflecting the difference between its two nearest contracts, narrowed to 14 cents per barrel, indicating ample supplies.