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Oil prices fall as investors watch Russia-Ukraine ceasefire discussions

Oil prices fall as investors watch Russia-Ukraine ceasefire discussions

Oil prices fell on Monday, as investors assessed the prospects for ceasefire negotiations aimed at ending Russia-Ukraine War. This could lead to a rise in Russian oil being sold to global markets.

Brent crude futures fell 25 cents or 0.4% to $71.91 per barrel at 0409 GMT. U.S. West Texas Intermediate Crude fell 20 cents or 0.3% to $68.08.

Both benchmarks closed higher on Friday, recording a second weekly gain. This was due to the new U.S. sanction on Iran as well as the latest production plan of the OPEC+ producer groups.

After discussions with Ukrainian diplomats on Sunday, a U.S. delegation will meet with Russian officials to discuss progress towards a Black Sea ceasefire as well as a wider cessation in violence in the Ukraine war.

Toshitaka Takawa, an analyst with Fujitomi Securities, said that the prices fell because of expectations of progress in peace talks between Russia and Ukraine as well as a possible easing of U.S. sanction on Russian oil.

He added that investors were holding back large positions while they evaluated future OPEC+ Production Trends beyond April.

OPEC+ – the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia – released a new schedule on Thursday for seven member countries to continue to reduce their oil production to compensate for pumping beyond agreed levels. This will be more than the monthly production increases the group plans to implement next month.

The OPEC+ production increase as early as April indicates further supply additions that may be difficult for demand factors to absorb fully, said Singapore-based IG Strategist Yeap JunRong.

OPEC+ agreed to cut output by 5,85 million barrels a day since 2022, which is about 5.7%. This has been done in a series steps to support the global market.

On March 3, it confirmed that eight members of the group would increase their monthly production by 138,000 bpd starting in April. The reason given was a healthier market.

The market participants are also watching the impact of new U.S. sanctions related to Iran announced last week.

The market sentiment towards oil prices has improved in recent months due to increased supply risks resulting from U.S. sanction on Iranian exports, and some optimism about the reciprocal tariffs that may be less severe than feared. However, the broader outlook for demand and supply remains mixed, IG’s Yeap stated.

Iranian oil shipments into China will likely fall after the new U.S. restrictions on a refiner, tankers and other vessels. This will increase shipping costs. However, traders expect buyers to find ways to maintain at least a certain volume. (Reporting and editing by Christopher Cushing, Christian Schmollinger, and Yuka Obayashi)

(source: Reuters)