Oil resumed its decline after Iran carried out a missile strike in Iraq following the suspension of nuclear talks, while Russia’s bombardment of Ukraine prompted more calls to sideline the OPEC+ producer.
Futures in New York fell below $108 a barrel after rising 3.1% Friday following a tumultuous week that saw prices whipsaw wildly. The halt of nuclear talks dashed hopes for a swift return of more supply to a tight market reeling from the war in Ukraine. Senior American and Chinese officials meet Monday as the Biden administration seeks to enlist China to help end the crisis.
That heralds the start of a jampacked week that will test whether Russia plans to repay its international debt and will likely see the Federal Reserve raise interest rates for the first time since 2018, potentially strengthening the dollar. Global markets have been in turmoil as prices of energy, metals and food soar to record highs amid widespread condemnation of Russia. A flare-up of virus cases in China is also causing some concerns about oil demand.
Iran and world powers on Friday suspended negotiations to restore a 2015 nuclear deal after Russia sought U.S. guarantees that sanctions imposed for its invasion of Ukraine wouldn’t affect its planned partnership with Iran. The setback may plunge the Persian Gulf into another cycle of violence.
While Russia has been hit with harsh sanctions and the U.S has banned imports of its crude, funds to the nation may not be completely choked off yet. India is said to be working out a mechanism to facilitate trade using local currencies, while supertankers were still being booked to load Russian oil off Denmark. At least some ships will be for cargoes that traded prior to the invasion.
Global benchmark Brent remains deep in backwardation, a bullish structure where near-dated contracts are more expensive than later-dated ones, signaling tight supply. The prompt timespread was $3.57 a barrel in backwardation, compared with $1.39 at the start of last month.
The White House said National Security Adviser Jake Sullivan will meet in Rome on Monday with China’s top diplomat, Communist Party Politburo member Yang Jiechi. President Joe Biden’s top advisers have been working to increase pressure on China to enforce sanctions on Russia’s economy imposed by the U.S. and its European and Asian allies.