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Oil price falls on Ukraine talks but Covid and inflation linger

Maersk oil field
Oil prices have fallen

Oil prices fell back as traders clung to hopes of a possible ceasefire in Ukraine.

In the latest round of talks, Russian and Ukrainian officials focused on an immediate withdrawal of troops and security guarantees, Ukraine negotiator Mykhailo Podolyak said. 

Hopes of a breakthrough promped oil futures in New York to close 5.8% lower on Monday, with the price dipping below $100 a barrel intraday for the first time since 1 March. Brent also shed over 5%.

West Texas Intermediate crude for April delivery lost $6.32, or 5.8%, to settle at $103.01 a barrel and May Brent crude fell $5.77, or 5.1% to $106.90 a barrel.

Global risks remain as lockdown measures were reimposed in China following a surge of Covid-19 infections which has forced the closure of factories, hitting deliveries to the likes of Apple.

Inflation also remains a concern an the US Federal Reserve will hike the interest rate for the first time in over three years on Wednesday. The Bank of England may follow suit on Thursday.

The FTSE 100 closed 37.83 points higher at 7,193.47. In the US, stocks rose early in the session until falling back. The Dow Jones Industrial Average ended the day flat, the S&P 500 slipped 0.74%, while the Nasdaq Composite was 2.04% lower.

Danni Hewson, AJ Bell financial analyst, said: “Investors have eased their way into the new week buoyed by “hard” peace talks between Russia and Ukraine. Even hard talks are better than no talks and markets have responded accordingly.

“But it’s covid that’s really making waves, as odd as it seems to be talking about covid again, a surge in cases in China which has led to a lockdown in Shenzhen has sent shares in vaccine maker Moderna higher and on the flip side pulled down Apple stocks after it emerged two factories that make the iPhone have had to close as part of those new restrictions.

“Miners have taken something of a pummelling as have a number of funds with an exposure to China and with the price of Brent crude making its way back towards $100 a barrel Big Oil companies have also seen their shares slip into reverse gear.”

Meanwhile, because of sanctions from the west Russia is looking for new buyers of its oil and us setting its sights on closer ties with India, the third-largest oil importer in the world.

India has abstained in several United Nations votes condemning Russia’s invasion of Ukraine – a sign that the Indian government is keeping its ties to Moscow intact.

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