Oil Plunges More Than 6% As Concerns Ease Over Supplies And COVID-19 Cases In China

Brent and WTI fell by more than $6 a barrel.
Russia backs resumption of nuclear deal with Iran
Ceasefire talks between Ukraine and Russia continue
China reports spike in COVID-19 cases

NEW YORK, March 15 – Oil prices fell more than 6% to their lowest level in nearly three weeks on Tuesday as supply disruption fears eased and rising COVID-19 cases in China sparked concern about demand.

Brent futures fell $6.66, or 6.2%, to $100.24 a barrel by 2:01 pm ET (1801 GMT), while West Texas Intermediate (WTI) fell $6.42, or 6.2%, to $96.59 a barrel.

Brent fell to $97.44 and WTI hit $93.53, its lowest level since February 25.

Both contracts have been approaching the oversold zone since December. They were in overbought conditions in early March, when the indices hit a 14-year high after Russia’s invasion of Ukraine. Since then, Brent has lost almost $40 and WTI has fallen more than $30.

Tuesday’s sharp decline followed a statement by Russian Foreign Minister Sergei Lavrov saying that Moscow was in favor of resuming the 2015 Iran nuclear deal as soon as possible. More

Negotiations to renew the nuclear deal, which would lift sanctions on Iran’s oil sector and allow Tehran to resume crude oil exports, have recently stalled due to Russian demands. More

At the same time, a Ukrainian negotiator on Tuesday said talks with Russia on a ceasefire and the withdrawal of Russian troops from Ukraine were ongoing.

In this illustration, taken December 1, 2021, a model of 3D printed barrels of oil is seen going down in front of the stock chart being displayed. REUTERS/Dado Ruvic/Illustration

As a result of the Russian invasion, which Russia calls a “special operation”, Western sanctions against Russia have failed to deter China and India from buying Russian oil. More

Tuesday’s sharp drop in prices surprised several analysts.

“While reports of promising talks (between Russia and Ukraine) are to be welcomed, it is difficult to know whether either side would be willing at this stage to make concessions acceptable to either side,” Kpler said in a research note. “In the current situation, it is difficult to understand why crude oil prices are not undervalued.”

Adding further price pressure, China is facing a spike in daily COVID-19 cases, raising new concerns about its recovery from the coronavirus pandemic. More

China’s daily oil refining rate fell 1.1% in the first two months of 2022 year-over-year, to its lowest level since December 2020, as independent refiners reduced operations after Beijing cut its import quotas crude oil.

Meanwhile, the US Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday for the first time in four years to fight rising inflation. Such a move could strengthen the US dollar and dampen demand for goods priced in that currency.

Aside from the Russian-Ukrainian conflict, spare crude oil production capacity remains limited by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+.

OPEC said on Tuesday that oil demand in 2022 has run into problems due to Russia’s invasion of Ukraine and rising inflation due to a sharp rise in oil prices, increasing the likelihood of a downgrade in the robust demand forecast this year. More

Reporting by Stephanie Kelly in New York; Additional reporting by Rowena Edwards in London and Yuki Obayashi in Tokyo; Edited by Marguerite Choi, David Goodman and Mark Porter

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