Oil rebounded in Asian trading as investors cautiously assessed the outlook for a de-escalation of Russia’s war in Ukraine, which has entered its second month and rattled markets worldwide.
Futures in New York rose above $105 a barrel after losing more than 8% over the previous two sessions. While Russia offered to “fundamentally cut back” its military operations in northern Ukraine, a person close to the Kremlin said the de-escalation doesn’t mean a cease-fire or complete withdrawal of troops from around the capital, Kyiv. The US also cautioned about declaring progress.
The war in Europe has roiled commodity markets and fanned inflation just as nations were seeking to encourage economic growth after the pandemic. It’s also whipped up extreme volatility, upended trade flows and squeezed already tight energy market, putting oil on track for a fourth monthly gain.
There are also threats to global demand from a virus resurgence in China and increased tensions in the Middle East. OPEC+ meets on Thursday to discuss its supply policy for May, although the group is expected to stick with its strategy of a modest output boost even as Russia’s war in Ukraine disrupts crude flows.
“Oil markets remain tight,” Stephen Innes, managing partner at SPI Asset Management, said in a note. Cease-fire talks and Covid lockdowns continue to dominate the headlines, although there is an expectation that business closures in China may be short-lived, he added.
West Texas Intermediate for May delivery rose 0.8% to $105.12 a barrel on the New York Mercantile Exchange at 10:21 a.m. in Singapore after losing 8.5% over the past two sessions.
Brent for May settlement gained 0.9% to $111.25 on the ICE Futures Europe exchange falling 2% on Tuesday.
Brent remains deeply backwardated, where near-dated contracts are more expensive than later-dated ones, although it’s eased over the past week. The prompt timespread for the global benchmark was $2.69 a barrel in backwardation, compared with $3.85 a week ago.
The American Petroleum Institute reported that US crude inventories fell by 3 million barrels last week, according to people familiar with the figures. The Energy Information Administration will release official data later Wednesday.