Oil up as Russia-Ukraine talks fail to yield results

ANKARA

Oil prices were up on Tuesday on the sustained aggression in Ukraine and the inconclusive outcome of the first round of negotiations between Ukraine and Russia, propelling fears of disruptions to Russian supplies.

International benchmark Brent crude was trading at $99.84 per barrel at 0733 GMT for a 1.91% gain after closing the previous session at $97.97 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $97.28 per barrel at the same time for a 1.63% increase after the previous session closed at $95.72 a barrel.

The first round of Ukraine-Russia talks aimed at putting an end to the fighting between Moscow and its neighbor ended with no immediate agreements and raised worries of supply disruptions.

According to Louise Dickson, Rystad Energy’s senior oil markets analyst, Russia’s energy supplies are very much at risk because of the prospect of either being withheld by Russia as a weapon or removed from the market due to sanctions.

“Even with Russian and Ukrainian factions meeting at the border to discuss a military ceasefire, the fragile situation in Ukraine and financial and energy sanctions against Russia will keep the energy crisis stoked and oil well above $100 per barrel in the near-term and even higher if the conflict escalates further,” she said.

On the supply side, she said risks continue driving a bullish trajectory in oil prices, with oil outages still on the table after economic sanctions were imposed on Russia by the European Union, the UK and US.

An immediate risk is the transport of Russian oil via the Druzhba pipeline, which can carry 1 million barrels per day (bpd) of exports to Europe, she said, adding that continued fighting in Ukraine also puts Black Sea trade at risk, with 2 million bpd of Russia, Kazakh, and Azeri oil passing through the Novorossiysk terminal daily.

Investors are monitoring the upcoming meeting of major oil producers of the OPEC+ group, of which Russia is a member.

ADM Investor Services' Chief Global Economist Marc Ostwald emphasized the increasing pressure on OPEC+ to add more barrels to the market.

“It should be remembered that throughout the Iran-Iraq war and the colossal tension between Iran and Saudi Arabia, OPEC still met, and those factors did not impact OPEC policy in any material way,” he said.

He further stressed that some OPEC members, like Iraq, are already struggling to meet current quotas, noting that it announced the suspension of output from two southern fields at the weekend.

Meanwhile, some international oil companies announced their exit from Russian investments and joint ventures.

Shell has become the latest company to announce its intention to exit its joint ventures with Gazprom and related entities. Equinor had previously relayed that it would end projects and joint ventures in Russia. bp had also confirmed its intention to sell its 19.75% stake in the Russian oil company Rosneft.

The International Energy Agency (IEA) head Fatih Birol said in a Twitter post that an extraordinary ministerial meeting would take place on Tuesday to discuss the impact of Russia's invasion of Ukraine on oil supply and how IEA members can play a role in stabilizing energy markets.