Oil rises on supply shortage despite ‘constructive’ talks between Ukraine and Russia

Oil prices rose early on Wednesday, reversing losses from the previous two sessions when trading followed news of Russian-Ukrainian peace talks, but a drop in U.S. crude inventories put the focus back on supply shocks.

The March benchmark Brent crude futures contract hit a high of $112.78 shortly after opening and last rose 0.7% to just over $111 a barrel, after edging higher. fell 2% in the previous session and about 7% on Monday.

Brent prices at one point fell more than 6% to a low of $106 a barrel on Tuesday. Yet they reversed some of those losses after the American Petroleum Institute (API) industry group reported crude inventories fell 3 million barrels in the week ending March 25.

U.S. West Texas Intermediate (WTI) crude futures rose nearly 0.5% to $105 a barrel, erasing a 1.6% decline on Tuesday.

The positive news from the peace talks between Russia and Ukraine helped investors feel better, as evidenced by the heightened appetite for risk.

Most global stock markets reacted positively to Russia’s pledges to scale back military operations near kyiv and surrounding towns, although on the ground reports of attacks continued. Asian stocks joined a global rally early Wednesday as hopes rose for a negotiated end to the Russian-Ukrainian conflict.

But Ukraine has reacted with skepticism to Russia’s promise in talks to scale back military operations around kyiv and other cities, with some Western countries expecting Moscow to step up its offensive in other parts of the country. country.

“We can say that the signals we are getting from the talks are positive, but they are not drowning out Russian shell explosions,” Ukrainian President Volodymyr Zelensky said in a late night speech.

Commonwealth Bank analyst Tobin Gorey noted that “the (price) recovery suggests that the oil market, at least, has a high degree of skepticism about any ‘progress'”, referring to the euphoria of the market following the progress of the peace talks between Russia and Ukraine.

Supply issues after the API report offset the increase in risk appetite. Major oil producers are not expected to increase production above their agreed 400,000 barrels per day when the Organization of the Petroleum Exporting Countries and its allies, including Russia, called OPEC+, meet on Thursday.

“We expect crude oil prices to remain volatile in today’s session ahead of Thursday’s OPEC+ meeting,” said Rahul Kalantri, vice president of commodities at Mehta Equities.