Oil claws back after losing 8% over lingering fears of further sanctions on Russia

By Sibel Morrow

ANKARA (AA) - Oil prices rebounded on Wednesday due to persisting fears over more sanctions on Russia although the Russia-Ukraine peace talks in Istanbul yielded positive outcomes, limiting further losses.

International benchmark Brent crude was trading at $110.09 per barrel at 0658GMT for a 2.2% increase after closing the previous session at $107.71 a barrel.

American benchmark West Texas Intermediate (WTI) was at $106.44 per barrel at the same time for a 2.11% gain after the previous session closed at $104.24 a barrel.

Oil prices dropped during the previous session to as low as $10 a barrel Tuesday after Russia pledged to significantly decrease its military activities in the Ukraine's Kyiv and Chernihiv to ramp up trust for future negotiations, the country's Deputy Defense Minister Aleksandr Fomin said at a press briefing after a fresh round of Russia-Ukraine peace talks held in Istanbul.

Meanwhile, Vladimir Medinsky, the head of the Russian delegation, said a meeting between the presidents of Russia and Ukraine could be held when a draft of a possible peace treaty is ready and approved.

However, further sanctions on Russia is still on the agenda of Western countries while they also continue efforts to find alternative energy sources to phase out dependency on Russian hydrocarbon resources.

Demand pressures after China decided to put its financial hub Shanghai under an 8-day lockdown exerted downward pressure on oil prices as the city home to 28 million people accounts for about 4% of the country's total oil consumption.

Up to 200,000 barrels per day (bpd) of demand is expected to be impacted for the duration of the restrictions.

Supporting the upward movements in the oil prices, the American Petroleum Institute (API) announced late Tuesday its estimate of a fall of 3 million barrels in US crude oil inventories, compared to the market expectation of a fall of 1.6 million barrels.

The US Energy Information Administration (EIA) will release official oil stock data later on Wednesday. Oil prices are due to rise if the EIA signals a drop in stocks.

Major oil producers of the OPEC+ group, of which Russia is a member are scheduled to hold their ministerial meeting on Thursday.

Except for slight output increases from baseline rises of the UAE, Iraq, Kuwait, Saudi Arabia and Russia starting from May, the group is expected to keep its 400,000 bpd production scheme unchanged.

"Oil markets continue to be on a roller coaster ride, with today's weekly EIA inventories and tomorrow's OPEC+ meeting in view, which sources suggest will be in a hurry to rubber stamp the planned 400,000 production increase and nothing more, though the rise in base output levels as of April does technically enable increases for UAE and Saudi Arabia,” ADM Investor Services' Chief Global Economist Marc Ostwald said in an e-mailed note.