By Barani Krishnan
Investing.com - Crude prices neared a two-week low on Tuesday despite dubious progress in Russia-Ukraine talks that suggested only one thing: the rebound, when it comes, will be wild and just what the oil bull had ordered.
London-traded Brent, the global oil benchmark, was down $2.02, or 1.8%, at $107.47 per barrel by 1:25 PM ET (17:25 GMT). It fell to as low as $102.25 during the session.
New York-traded U.S. crude benchmark West Texas Intermediate, or WTI, was down also $2.02, or 1.9%, at $103.94. WTI fell below the $100 support to $98.58 earlier, marking a near two-week low.
The slump followed Monday’s 7% drop in both crude benchmarks and reinforced the sheer volatility that has become the new normal for oil these days. It’s a phenomenon that appears encouraged by longs seeking to buy the dip in crude, to profit big-time later.
Ukrainian presidential advisor Mykhailo Podoliak said on Tuesday peace talks have been “successful enough” for a possible meeting between President Volodymyr Zelensky and his Russian counterpart Vladimir Putin.
“We have documents prepared now which allow the presidents to meet on a bilateral basis," he told CNN.
Russia’s top negotiator in the Ukraine crisis Vladimir Medinsky, meanwhile, told Moscow-based Tass news agency that de-escalation around the Ukraine capital Kyiv did not mean a ceasefire was in progress.
Reuters also quoted a Westen official, speaking anonymously, that “nothing we've seen so far has proven that Russia is really serious about peace negotiations, and it seems to be more of a tactical exercise to buy time.”
“The diplomatic language would be ‘it’s too early to tell’ but the reality is these guys are just jacking us around and oil bulls are only to happy with the upward swing in prices that’s likely to come from each dip,” said John Kilduff, partner at New York energy hedge fund Again Capital.
“Just look at the trend: Monday through Wednesday are selloff days and Thursday-Friday are buyback days because no one is prepared to go short into the weekend, not knowing what could happen. The only guys winning are those playing the volatility.”
Few market participants also expect prices to remain depressed beyond Thursday, when OPEC+ holds its monthly meeting. The 23-nation strong oil producing alliance is bent on keeping prices at or above $100 a barrel and has not budged in adding a single barrel beyond the monthly increments of 400,000 barrels per day in production it has allowed since last year.
“Longer-term pressures remain and OPEC+ looks unlikely to do anything to alleviate those this week,” said Craig Erlam, analyst at online trading platform OANDA.
While OPEC+ has repeatedly stated its desire to remain “apolitical” and base its decisions purely on achieving a “balanced market”, Erlam said the reality suggested otherwise.
“Given how unbalanced the market is and the fact that at the center of the alliance is the country to blame for the most recent surge in oil prices, it's hard to view a decision to not increase output targets as anything but political.”
Aside from the Russia-Ukraine narrative, traders were on the lookout on Tuesday for U.S. weekly oil inventory data, due after market settlement from the American Petroleum Institute, or API.
The API will release at approximately 4:30 PM ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended March 25. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For the week ended March 25, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 1.56 million barrels, on top of the 2.51 million decline reported for the week to March 18.
On the gasoline inventory front, the consensus is for a draw of 1.9 million barrels over the 2.95 million barrels consumed in the previous week.
With distillate stockpiles, the expectation is for a drop of 1.67 million barrels versus the prior week’s slide of 2.1 million.