OIL FUTURES: Brent falls below $100/b as China lockdowns, Ukraine peace talks add headwinds

Crude oil price declines extended March 15 as supply concerns eased amid spreading lockdowns in China and hopes for Ukraine-Russia negotiations could lead to a potential ceasefire.

NYMEX April WTI settled $6.57 lower at $95.44/b and ICE May Brent declined $6.99 to $99.91/b.

Front-month Brent last settled below the $100/b level Feb. 25.

China, the world's largest importer of oil, sent nearly 30 million people into lockdown across the country in an effort to contain its worst coronavirus crisis since early 2020, spurred by the highly-transmissible omicron variant.

The government locked down Shenzhen city and Jilin province, while China's largest city, Shanghai, is under a slew of pandemic-related restrictions as the country pursues its "zero-COVID policy," local media reported.

Oil benchmarks are pulling back at the thought of some demand erosion stemming from recently announced lockdowns in China," Han Tan, Exinity's chief market analyst, told S&P Global Commodity Insights.

"The impact on China's energy consumption is highly contingent on the duration of such stringent lockdowns, noting that the affected areas' share of exports, car production, and even headline GDP are in the double digits," Tan said.

NYMEX April RBOB settled 17.08 cents lower at $2.9981/gal and April ULSD gave back 24.66 cents to finish at $3.0297/gal.

"China oil demand risk is real, it is estimated that a severe lockdown in China could put 0.5 million [b/d] of oil consumption at risk, which would be further compounded by fuel shortages due to inflated energy prices," said Louise Dickson, senior oil market analyst at Rystad Energy. "The reprieve of cheaper oil may be short-lived, however, as falling prices indicate the market has not fully realized the potential impact of lost Russian barrels on global supply," she added.

The European Commission March 15 said it welcomed an agreement in the EU Council on a fourth sanctions package against Russia, which includes curbs on the country's energy investments.

The measures include a "far-reaching ban on new investment across the Russian energy sector, with limited exceptions for civil nuclear energy and the transport of certain energy products back to the EU," the EC said in a statement.

However, the fresh round of sanctions stopped short of banning imports of Russian oil, breaking with the US, which banned imports of Russian energy products March 8.

Meanwhile, optimism surrounding Russian and Ukrainian peace negotiations added further pressure, analysts said. Ukrainian President Volodymyr Zelensky provided an upbeat assessment of peace talks with Russia, which resumed March 14, in his latest address later that day, saying the negotiations went "pretty good" and will continue March 15.

ING commodities analysts Warren Patterson and Wenyu Yao said in a note that "negotiations between Russia and Ukraine appear to be weighing on the market, with hopes talks lead to some form of de-escalation."