Oil down over weakening demand in China, ongoing Russia-Ukraine talks

By Sibel Morrow

ANKARA (AA) - Oil prices edged lower on Tuesday over possible deal between Russia and Ukraine as well as fears about a weak demand in China after the country decided to lock down over 28 million people as part of its COVID mitigation measures.

International benchmark Brent crude was trading at $109.05 per barrel at 0651 GMT for a 0.4% decrease after closing the previous session at $109.49 a barrel.

American benchmark West Texas Intermediate (WTI) was at $105.44 per barrel at the same time for a 0,49% loss after the previous session closed at $105.96 a barrel.

After reporting a new daily record for asymptomatic infections, Shanghai, China's financial capital, was shut down in two stages over the next eight days.

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

“Global oil demand has been showing signs of weakness in the month of March and this weakness is expected to persist through April and May due to the impact of high oil prices globally, the negative effects of sanctions and war in Russia and Ukraine, and the consequences of increasing lockdowns in China,” Claudio Galimberti, Rystad Energy’s senior vice president of analysis, said in an e-mailed note.

Experts say between 1.2 and 1.5 million bpd of Russian crude exports have been lost since the start of the invasion of Ukraine on Feb. 24, while around 3 million bpd is expected to be rerouted from Europe to Asia.

“The OPEC+ meeting on March 31, 2022 will shed light on whether the UAE and Saudi Arabia are willing and able to fill some of the gap left by Russia’s crude export loss,” Galimberti said.

Investors are now monitoring the upcoming meeting of major oil producers of the OPEC+ group, of which Russia is a member.

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.

The market players also focused on talks between Russia and Ukraine to be held in Istanbul later in the day.