Progress in the peace talks between Russia and Ukraine lowers the price of oil

By: Dr. Franyi Sarmiento, PhD., Inspenet, March 17, 2022.

The international price of oil closes a new day down due to the advances in the peace talks between Russia and Ukraine. The price of WTI oil ended the day on March 16 with a decrease of 1.5% to close at USD 95.04 a barrel.

WTI continues to lose ground due to progress in the peace talks between Russia and Ukraine and due to the increase in crude oil inventories in the United States.

Oil contracts have been in constant fluctuations for more than two weeks and reached their peak on March 8, when they settled at USD 123.70 a barrel. The price escalation began after Russia’s invasion of Ukraine on February 24, and gained strength with the sanctions that the United States and other countries imposed on Russia, a country that is one of the largest oil and gas producers in the world. The sanctions have disrupted the trade of some five million barrels a day of oil from Russia.

Several factors are driving the turnaround in oil prices, including hopes for a peace deal between Russia and Ukraine. Another factor is the dim signs of progress between the United States and Iran in resurrecting a 2015 deal, which would allow Iran to export oil.

In addition, Chinese demand is expected to slow due to a rise in coronavirus cases in that country. Although the latest figures show a lower number of new Covid cases in China.

Another factor is the growth of US inventories by 4.3 million barrels, when they were expected to fall.

For its part, the S&P 500 index of the New York Stock Exchange closed higher on March 16, after a day shaken by the rise in interest rates by the United States Federal Reserve. The Federal Reserve announced a quarter point increase in its overnight benchmark interest rate, just as the market expected. But the projection that its interest rate will be between 1.75% and 2% by the end of the year has surprised by its harshness. The S&P 500 was up 96.45 points, or 2.26%, near the close, while the Nasdaq gained 491.50 points, or 3.80%. The Dow Jones Industrial Average rose 521.10 points, or 1.55%.