The market is bullish on oil as it concentrates on the cease-fire talks and the Chinese COVID-19 outbreak

The market is bullish on oil as it concentrates on the cease-fire talks and the Chinese COVID-19 outbreak

The bears have regained control of the oil market, with prices falling more than 5% in the Asian session on Tuesday, to a two-week low, after ceasefire talks between Russia and Ukraine alleviated fears of more supply interruptions. The rising number of COVID-19 cases in China, which has fanned fears about slowing demand, given that China is the black liquid's main importer, has also weighed in the price.

Brent futures, the global benchmark, are down 5.24 percent, trading at $101.34 after falling more than $6 to $100.05 earlier in the day. The US benchmark, West Texas Intermediate (WTI) crude, dipped below $100 for the first time since March 1, losing 5.20 percent and currently trading at $98.09 per barrel. Earlier in the session, the benchmark fell as low as $96.70.

Both benchmarks also sank by more than 5% the previous day, with Brent plunging 5.1% and WTI plummeting 5.8%. "Expectations of positive progress in the Russia-Ukraine peace talks bolstered hopes to reduce tightness in the global crude market," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd. In China, new lockdowns to combat the COVID-19 outbreak have created concerns about sluggish demand."

On Tuesday, China saw a sharp increase in daily COVID-19 infections, with new cases more than doubling from the previous day to a two-year high as a viral outbreak spread fast across the country's northeast.

After Monday's video meetings ended with no significant progress, more talks between Ukrainian and Russian negotiators to alleviate the conflict are anticipated on Tuesday. So far, customers have shied away from Russian oil, with a cargo of the country's trademark Urals going unsold despite brokers cutting the price to a record low.

According to individuals familiar with the issue, US President Joe Biden will fly to Brussels next week to meet with NATO leaders to discuss Russia's intervention in Ukraine.

Two Indian officials said that while the US has warned China against providing military or financial assistance to Moscow, India may accept a Russian offer to buy crude oil and other commodities at a discount, indicating that Delhi wants to keep its important trading partner on board.

"Even if there is a ceasefire, oil prices are projected to remain high as Western attempts to isolate Moscow through sanctions will continue, putting the global oil market in a tight condition," said Tsuyoshi Ueno, senior economist at NLI Research Institute. Nonetheless, some investors have unwound their long bets in the oil market as they become increasingly concerned about recent volatility."

Oil prices are falling at an alarming rate, therefore investors are anticipated to cut their bullish wagers. This is because bears are taking advantage of the oil market's extraordinary volatility, which has made maintaining derivative long positions more expensive. The Federal Reserve, which is poised to begin tightening monetary policy this week, is currently the focus of investors' attention. Markets are expected to be impacted as a result of this action.