Oil fell on Wednesday in another volatile session as traders reacted to hoped-for progress in Russia-Ukraine peace talks and a surprising increase in U.S. inventories.
Around noon in New York, global benchmark Brent was slightly lower and U.S. crude was slightly higher.
The oil market has been on a roller-coaster for more than two weeks, trading in wide ranges of several dollars a day.
On Wednesday, global benchmark Brent crude had swung between $97.55 and $103.70 and was down 2.35% to $97.56 per barrel at 2:40 p.m. on Wall Street. U.S. West Texas Intermediate (WTI) crude shed 1.45% to settle at $95.04 per barrel.
Last week’s frenzied rally pushed Brent briefly past $139 a barrel on worries about extended disruption to Russian supply. Now, a cascade of selling has pushed prices much lower, but some analysts have warned that this reflects too much optimism that the war will end soon.
“We’re living headline to headline here,” said Robert Yawger, director of energy futures at Mizuho.
The United States and other nations have slapped heavy sanctions on Russia since it invaded Ukraine more than two weeks ago. This disrupted Russia’s oil trade of more than 4 to 5 million barrels of crude daily.
Brent staged a 28% rally in six days and then a 24% drop over the next six sessions counting Wednesday. A number of factors drove the turnaround, including modest hopes of a Russia-Ukraine peace agreement and faint signals of progress between the United States and Iran to resurrect a 2015 deal that would allow the Islamic Republic to export oil if it agrees to limit its nuclear ambitions.
In addition, Chinese demand is expected to slow due to a surge in coronavirus cases there, although figures showed fewer new cases and Chinese stimulus hopes boosted equities.
Three million barrels per day of Russian oil and products may not find their way to market beginning in April, the International Energy Agency (IEA) said, as sanctions bite and buyers hold off.
“These losses could deepen should bans or public censure accelerate,” the Paris-based IEA said in a report that also showed a cut in its oil demand forecast for 2022.
U.S. inventories rose by 4.3 million barrels, against expectations for a loss, while stocks at the Cushing, Oklahoma, hub rose as well, alleviating a bit of concern about the low level of inventories there.
Crude settled below $100 on Tuesday, the first time since late February. Prices hit a 14-year high on March 7.
Signs of progress in Russia-Ukraine peace talks added to the bearish tone. Ukraine’s president said the positions of Ukraine and Russia were sounding more realistic, but time was needed. Russia’s foreign minister said some deals with Ukraine were close to being agreed.
“Fears of a supply disruption have been tempered by tentative signs of progress in ceasefire talks between Russia and Ukraine,” said Stephen Brennock of oil broker PVM.
“That said, an end to hostilities still seems like a long way off.”