Following a volatile week, oil prices fell

After Ukraine’s president claimed discussions with Moscow showed signs of becoming more meaningful, oil fell after a turbulent week of trading, encouraging cautious optimism about steps toward deescalation.

After climbing on Friday, futures in New York plummeted more than 3% to trade below $106 a barrel. The conflict in Ukraine has roiled commodity markets, causing purchasers to avoid Russian oil while navigating sanctions, but some are seeking solutions. Senior American and Chinese officials will meet on Monday to discuss how the US might enlist China’s assistance in ending the invasion. Given some positive words, oil is pricing in the possibility of a rapprochement. There has been a frenzy of diplomatic efforts to bring the war to an end. According to a critical adviser to Ukrainian President Volodymyr Zelensky, “ongoing” video talks with Russia occurred, while Russian President Vladimir Putin spoke with his French and German counterparts after speaking with Zelensky. Antony Blinken, the US Secretary of State, also met with Ukraine’s foreign minister.

It marks the start of a busy week that will see the Federal Reserve raise interest rates for the first time since 2018, potentially strengthening the dollar, and test whether Russia intends to repay its international debt. A recurrence of a virus in China also raises fears about oil demand.

Benchmarking worldwide Brent remains backward, a bullish pattern in which near-dated contracts are more costly than later-dated contracts, indicating a scarcity of supply. In backwardation, the prompt time spread was $3.64 per barrel, up from $1.39 earlier this month. President Joe Biden’s top aides have been working to pressure China to enforce US and European and Asian partners’ sanctions against Russia’s economy. China’s senior diplomat, Communist Party Politburo member Yang Jiechi, will meet with National Security Adviser Jake Sullivan in Rome on Monday.