New diplomatic efforts to end the war in Ukraine have been putting pressure on Oil prices since the end of last week, Commerzbank's commodity analyst Carsten Fritsch notes.

US-Ukraine agreement sparks market uncertainty

"Over the weekend, the US and Ukraine reached an agreement in Geneva on a plan to end the war, which differs in some respects from the 28-point plan previously negotiated with Russia. The details are not yet known. It is also unclear whether Russia will agree to this plan. The Kremlin has already rejected a separate proposal from the EU, sowing doubts about a solution and causing Oil prices to rise again yesterday."

"If a peace agreement is reached, the Oil sanctions against Russia could also be lifted. This would particularly affect the US sanctions against the two largest Russian Oil companies, which came into force last Thursday. As a result of these sanctions, refineries in India and China announced that they would no longer purchase Russian Oil, leading to a decline in Russian Oil exports and an increase in crude Oil from Russia stored in tankers at sea. This Oil would then become available again."

"In addition, the mutual attacks by Russia and Ukraine on energy infrastructure would probably come to an end. The attacks on refineries have also led to a noticeable disruption in Russian Oil supplies, particularly for Oil products. The sharp decline in the gasOil crack spread, which has fallen by USD 10 per barrel since last Thursday's high, is likely to be largely due to hopes that the war in Ukraine could soon come to an end."