By Peter Nurse
Investing.com -- Oil prices slumped Tuesday, continuing the sharp losses of the previous session as peace talks between Ukraine and Russia appeared to make progress, potentially bringing to an end the conflict which has roiled global supplies.
By 9:15 AM ET (1315 GMT), U.S. crude futures traded 6% lower at $99.58 a barrel, while the Brent contract fell 5.6% to $103.39. Both benchmark contracts lost around 7% on Monday.
U.S. Gasoline RBOB Futures were down 4.1% at $3.0648 a gallon.
Negotiators from both Russia and Ukraine sat down in Istanbul earlier Tuesday for the first face-to-face talks in nearly three weeks.
Confidence is growing that these discussions could result in a breakthrough after reports indicated that Moscow was prepared to sharply cut operations near the Ukraine capital Kyiv as evidence of goodwill.
In addition, Ukraine proposed adopting neutral status in exchange for security guarantees, meaning it would not join military alliances or host military bases, as well as a 15-year consultation period on the status of annexed Crimea.
Russia’s invasion of Ukraine and the associated Western sanctions on the world’s second-largest exporter of crude had driven prices above $100 a barrel earlier this month.
Crude had sold off sharply on Monday on the news that Shanghai, China’s financial hub, would be locked down in two stages over an eight-day period to carry out Covid-19 testing after it reported a new daily record for asymptomatic infections.
China is a major source of demand for the crude market, being the world’s largest importer of oil, and fears of reduced economic activity weighed heavily.
Still, there remains a great deal of uncertainty in the crude oil market, with a Ukraine peace deal still undetermined, the Covid-19 situation in China remaining very fluid and the overall supply situation still very tight.
Kazakhstan added to the situation after the country’s energy ministry stated that the OPEC+ signatory is set to lose at least a fifth of its oil production for a month after storm damage to mooring points used to export crude from the Caspian Pipeline Consortium.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, meets on Thursday, to discuss future output levels.
The group has come under increasing pressure to pump more crude since Russia invaded Ukraine, but the energy ministers of Saudi Arabia and the United Arab Emirates, key members of OPEC+, said on Tuesday they should not engage in politics.
This suggested that the group will stick to its previously announced plan of increasing output by 400,000 barrels a day from May, even if the Kazakhstan news makes it even less likely to achieve than usual.
Elsewhere, the American Petroleum Institute reports its weekly inventory data at 4:30 PM ET, after recording a drop of just over 4 million barrels last week.