Oil rises back above $100, Russia-Ukraine talks limit gain

Oil rose almost 3% on Wednesday, back above $100 a barrel, recovering from a decline in the previous session as concern eased about slowing demand in China, although signs of progress in Russia-Ukraine peace talks limited gains.

Ukraine’s president said the positions of Ukraine and Russia were sounding more realistic, but more time was needed. Russia’s foreign minister said some deals with Ukraine were close to being agreed.

“Fears of a supply disruption have been tempered by tentative signs of progress in ceasefire talks between Russia and Ukraine,” said Stephen Brennock of oil broker PVM.

“That said, an end to hostilities still seems like a long way off.”

Brent crude rose $2.55, or 2.6%, to $102.46 a barrel by 0923 GMT. U.S. West Texas Intermediate (WTI) crude added $1.34, or 1.4%, to $97.78 a barrel.

Oil pared more gains after the International Energy Agency in a monthly report cut its oil demand forecast for 2022. [IEA/M]. A day earlier, the Organization of the Petroleum Exporting Countries held its forecast steady. [OPEC/M]

Crude settled below $100 on Tuesday, the first time since late February. Trading has been volatile since Russia’s invasion of Ukraine on Feb. 24, with prices hitting a 14-year high on March 7, but Brent has since fallen nearly $40 a barrel.

The U.S. Federal Reserve is expected to raise rates for the first time in three years later on Wednesday and give guidance on future tightening. Investors are expecting the central bank to raise rates by at least 25 basis points.

Oil had also come under pressure this week from concerns of slowing demand in China as it takes stringent measures against the Omicron coronavirus variant.

Still, new domestically transmitted cases in China fell by nearly half on March 15 compared with the previous day, the national health commission said.

Parts of China could be freed from lockdown if Omicron infections stay mild, said Stephen Innes, a managing partner at SPI Asset Management.

Besides the Fed decision, in focus on Wednesday will be the latest round of U.S. inventory data due at 1530 GMT from the Energy Information Administration. Analysts expect a 1.4 million barrel drop in crude stocks. [EIA/S]