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Oil slumped as Russia said it was taking steps to “de-escalate” the conflict in Ukraine, while floating the possibility of a meeting between President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskiy.
West Texas Intermediate futures declined as much as 7.1%, dropping below $100 a barrel – the latest in a sequence of huge swings across the oil market. Moscow said it would sharply cut military operations near the Ukrainian capital of Kyiv, though troops had already been bogged down there for weeks.
Russia’s chief negotiator said there is a willingness to consider a presidential meeting between Putin and Zelenskiy. Kyiv has long sought direct talks, while Moscow had resisted committing to Putin’s participation.
“Hopes are rising that the talks between Russia and Ukraine will eventually get some results,” said Hans Van Cleef, senior energy economist at ABN Amro. “Or in other words, that the Russian oil supply won’t be hit any harder than the self-sanctioning that we have seen so far.”
Oil has been buffeted by wild swings in recent weeks which has made investors wary of trading. On Monday, WTI fluctuated $10 intraday, while Tuesday’s enormous swings are yet another indication of the liquidity issues currently facing the market. Wheat, aluminum and gold also declined on the news of a partial Russian pullback.
Prices were also softer Tuesday as China grapples with its biggest Covid outbreak since the pandemic began. The latest restrictions in Shanghai could lower oil demand by up to 200,000 barrels a day for the duration of the restrictions, consultant Rystad Energy said in a report.
Still, crude has largely traded above $100 a barrel since Moscow invaded Ukraine as concern built that supply from one of the world’s largest producers will be disrupted. Oil majors including Shell Plc and TotalEnergies SE have already announced plans to eventually stop trading Russian oil and the value of the nation’s barrels has plunged.
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