Crude oil prices extended their decline and fell to a two-week low early on Tuesday on hopes of peace talks between Russia and Ukraine and driven by expectations of a fall in demand from China as the country battles a surge in the Omicron variant of the coronavirus cases.
Global benchmark Brent crude futures for the front-end month fell nearly 4 per cent to last trade around $103 after falling over 5 per cent on Monday.
What has helped ease oil supply concerns is the International Energy Agency (IEA) chief Fatih Birol urging oil-producing countries to pump more to stabilise markets affected by the war in Ukraine.
According to Reuters, while British Prime Minister Boris Johnson is trying to persuade Saudi Arabia to increase its oil output, a senior minister said on Monday, following reports, that Mr Johnson would travel to the OPEC heavyweight this week.
"Crude has come under pressure amid efforts to resolve Russia-Ukraine issue, increased virus cases in China and profit-taking ahead of Fed decision. Crude, however, pared some losses post-China's better than expected industrial production and retail sales data. Crude has already corrected sharply, and we may see some stability as focus shifts to weekly inventory report," said Ravindra Rao, Head of Commodity Research at Kotak Securities.
On Tuesday, China recorded a steep jump in daily COVID-19 infections, recording 5,280 new cases - with new symptomatic cases more than doubling from a day earlier to a two-year high as a virus outbreak expanded rapidly in the country's northeast.
The record figure was driven by a surge in nationwide Omicron outbreaks, with over 3,000 domestic transmissions.
Ukraine's President Volodymyr Zelensky said late on Monday that negotiations with Russia, the world's second-largest crude exporter, will continue on Tuesday.
Zelensky also said he spoke with Israeli Prime Minister Naftali Bennett as part of a negotiation effort to end the war with Russia "with a fair peace."
The United States warned China after "intense" talks on Monday against helping Moscow invade Ukraine.
"Expectations of positive developments in the Russia-Ukraine ceasefire talks bolstered hopes to ease tightness in the global crude market," said Toshitaka Tazawa, an analyst at Fujitomi Securities told Reuters.
"Fresh lockdowns to curb the COVID-19 pandemic in China also raised concerns over slower demand," he added.