- The better sounding news flow regarding the possibility of a diplomatic solution to the Russo-Ukrainian war is weighing heavily on crude oil.
- Talks between the foreign ministers of Russia and Ukraine on Thursday will be key.
- WTI is currently down over $7.50 as traders also weigh a potential US-Iran nuclear deal and further stockpile releases.
A slightly more conciliatory tone in the rhetoric from Ukrainian and Russian officials regarding the possibility of a diplomatic solution to the war ahead of Thursday’s meeting of the two nations’ foreign ministers in Turkey has made markets tankers collapse. Russia said on Wednesday that “some progress” had been made with Ukraine and put forward a possible territorial compromise, while a Ukrainian official close to President Zelenskyy hinted that Russian demands for “neutrality” may be discussed. WTI futures from the previous month they have subsequently lost almost $6.50 a barrel in the session to near the $118 level, a change of almost $12 from Tuesday’s highs near $130.
Traders also said that markets were taking a more relaxed view on the US ban on Russian oil imports announced on Tuesday and that this was weighing on prices. “Theoretically, the United States could even offset Russia’s power outages with its own production,” said a Commerzbank analyst. Elsewhere, some traders cited expectations of more oil stock releases as triggers for profit-taking after the head of the International Energy Agency hinted that last week’s decision by member countries to release 60 million of barrels could be the first of new releases.
As oil traders continue to juggle numerous competing themes, choppy market conditions are likely to remain for some time. With Iran’s top negotiator in the nuclear talks returning to Vienna on Wednesday to continue discussions, a deal may be imminent, despite recent concerns that the Russians are adding additional demands. A deal would pave the way for more than 1.3 million barrels in daily Iranian crude oil exports to return to global markets. Attention will turn to the global crude oil inventory situation with the release of weekly US official data at 15:30 GMT.
Technical levels
Source: Fx Street
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