Oil prices continued to decline on Tuesday as Ukraine and Russia prepared for peace talks, coupled with concerns about demand following the lockdown of Shanghai, China's financial hub, to curb rising COVID-19 cases. Brent crude futures dropped by 60 cents or 0.5% to $111.88 per barrel at 0649 GMT, after reaching a low of $109.97. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures decreased by 59 cents or 0.6% to $105.37, having hit a bottom at $103.46. Both benchmark contracts lost about 7% on Monday.
Ukraine and Russia are set to meet in Istanbul today for their first peace talks in more than two weeks. The sanctions imposed on Russia following its invasion of Ukraine have curtailed oil supplies and pushed prices to a 14-year high earlier this month.
Shanghai's phased lockdown, lasting nine days, is also expected to harm fuel demand in China, the world's largest oil importer. According to ANZ Research analysts, Shanghai accounts for about 4% of China’s oil consumption.
The market is awaiting a meeting on Thursday of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a coalition known as "OPEC+". Several sources close to the group stated that they will likely adhere to plans for modest increases in oil production in May, despite rising prices and calls from the U.S. and others for more supplies.
Global demand has nearly returned to pre-pandemic levels, but supplies have been disrupted as OPEC+ has been slow to restore output after the cuts made during the pandemic in 2020. Traders noted that U.S. oil exports have surged since the Russian invasion of Ukraine, with domestic barrels that typically would go to the storage hub in Cushing, Oklahoma, being exported via the Gulf Coast.
