LONDON—Oil prices fell around $7 a barrel on Monday as investors pinned hopes on diplomatic efforts between Ukraine and Russia to end their conflict, while a surge in COVID-19 cases in China spooked the markets.
Brent was down by $6.78, or 6 percent, at $105.89 a barrel at 1358 GMT and U.S. crude fell $7.01, or 6.4 percent, to $102.32.
Both benchmarks have surged since Russia’s Feb. 24 invasion of Ukraine and are up roughly 40 percent in the year to date.
Ukrainian and Russian negotiators began to talk again on Monday. Negotiators had given their most upbeat assessments after weekend negotiations, suggesting there could be positive results within days.
“Beside new talks between Ukraine and Russia, I guess new lockdowns in China are the reason for a negative start of the week for crude oil,” said UBS analyst Giovanni Staunovo.
A northeastern Chinese province on Monday imposed a rare travel ban on its population as the region’s Omicron outbreak helped drive China’s tally of new local COVID-19 cases so far this year higher than the total in 2021.
“Oil prices might continue moderating this week as investors have been digesting the impact of sanctions on Russia, along with parties showing signs of negotiation towards (a) ceasefire,” said Tina Teng, an analyst at CMC Markets.
The United States has announced a ban on Russian oil imports and Britain said it would phase them out by the end of 2022. Russia is the world’s top exporter of crude and oil products combined, shipping about 7 million bpd or 7 percent of global supplies.
India said it would take “appropriate” steps to calm the rise in oil prices, indicating the country could release more oil from its national stocks if required.
Meanwhile, investors are watching this week’s meeting of the U.S. Federal Reserve, which is expected to start raising interest rates, a move that would boost the dollar and could push down oil prices.
A stronger greenback makes dollar-denominated oil more expensive for holders of foreign currencies.
By Bozorgmehr Sharafedin