Oil Gains Nearly 3% After Abrupt End to Russia-Ukraine Talks

Summary

Ukraine peace talks end in Geneva after Zelenskiy says Russia stalling
Iran, US reach understanding on main ‘guiding principles’ in nuclear talks
Eurasia Group sees 65% chance of US strikes on Iran by April
Iran and Russia to conduct navy drill on Thursday, Fars news agency reports

(Reuters) – Oil prices gained nearly 3% on Wednesday after peace talks between Ukraine and Russia in Geneva ended after only two hours, with Ukrainian President Volodymyr Zelenskiy describing them as “difficult”.

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Brent crude oil futures were up $1.85, or 2.7%, to $69.27 a barrel at 1227 GMT, while U.S. West Texas Intermediate (WTI) crude was up $1.78, or 2.9%, at $64.11.

After talks ended, Zelenskiy accused Russia of deliberately seeking to delay progress toward a deal to end the four-year-old war.

Russia’s chief negotiator Vladimir Medinsky said the talks were difficult but business-like, and that a new round would be held soon.

The U.S.-mediated talks in Switzerland took place as U.S. President Donald Trump has twice in recent days suggested it was up to Ukraine to take steps to ensure their success.

Hungary has halted shipments of diesel to neighbouring Ukraine and will not resume them unless Ukraine restarts crude shipments via the Druzhba pipeline to Hungary, Foreign Minister Peter Szijjarto said on Wednesday.

There have been weeks of disrupted supplies of Russian oil flows through Ukraine to Slovakia and Hungary, which Kyiv blames on a Russian attack on January 27.

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PROGRESS ON US-IRAN TALKS

On Tuesday, oil prices fell after Iran and the U.S. reached an understanding on “guiding principles” in talks aimed at resolving their longstanding nuclear dispute, though that does not mean a deal is imminent, Iranian Foreign Minister Abbas Araqchi said.

Just as talks began on Tuesday, Iranian state media said Iran was temporarily shutting parts of the Strait of Hormuz, a vital global oil supply route, due to “security precautions” while its elite Revolutionary Guards conducted military drills there. Later, state media said the strait had been shut for a few hours, without making it clear if it had fully reopened.

“Iran knows Trump’s negotiation tactics now. It also knows that a disruption in oil exports out of the Strait of Hormuz and a rally in the oil price to $150 per barrel is the very last thing Trump wants,” said SEB chief commodities analyst Bjarne Schieldrop in a note. “Iran has time to negotiate in calmness.”

Iran and Russia will conduct navy drills in the Sea of Oman and the northern Indian Ocean on Thursday, the Iranian semi-official Fars news agency reported, a few days after Revolutionary Guards conducted military drills in the Strait of Hormuz.

Political consultancy Eurasia Group said in a Tuesday note to clients that it thinks there is a 65% probability of U.S. military strikes against Iran by the end of April.

Investors will watch for weekly reports by the American Petroleum Institute, due later in the day, and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, on Thursday. Analysts polled by Reuters estimated that U.S. crude oil stockpiles likely rose last week, while distillate and gasoline inventories probably fell.

Reporting by Stephanie Kelly in London, Mohi Narayan in New Delhi and Katya Golubkova in Tokyo. Editing by Kim Coghill, Philippa Fletcher and Mark Potter