HG MARKETS:

Oil prices continued their decline on Monday as market participants awaited further clarity on diplomatic efforts to end the conflict in Ukraine and assessed the potential resumption of crude exports from northern Iraq. Brent crude futures fell by 14 cents, or 0.2%, to $74.29 per barrel, while U.S. West Texas Intermediate (WTI) crude futures declined by 21 cents, or 0.3%, to $70.19 per barrel. Both benchmarks had dropped over $2 on Friday, recording weekly losses of 0.4% and 0.5%, respectively.

Investor focus remains on negotiations aimed at ending Russia’s invasion of Ukraine, which entered its fourth year on Monday. European Union leaders are set to convene for an extraordinary summit on March 6 to discuss additional support measures for Ukraine and broader European security guarantees. On Sunday, Ukrainian President VolodymyrZelenskiy stated his willingness to step down if it would bring peace to his country. Meanwhile, former U.S. President Donald Trump has reportedly initiated talks with Russia, excluding both Ukraine and the European Union from the discussions. A senior Russian diplomat confirmed that Russian and U.S. officials plan to engage in further negotiations this week.

While Western sanctions on Russian oil exports have disrupted global seaborne supply flows, an end to the Ukraine conflict would not necessarily lead to an immediate increase in Russian crude exports. Russia remains a member of the OPEC+ alliance, which has implemented production curbs to stabilize global oil markets.In addition to geopolitical uncertainties, expectations of an increase in Iraqi crude supply have also exerted downward pressure on prices. However, the timeline for resuming exports via the Iraq-Turkey pipeline remains unclear. According to an Iraqi oil ministry official, once shipments resume, Iraq plans to export 185,000 barrels per day from Kurdistan’s oilfields through the pipeline.

Oil markets experienced significant selling pressure on Friday, with ICE Brent settling 2.68% lower and WTI briefly trading below $70 per barrel for the first time this year. The recent price weakness coincides with speculation regarding OPEC+ supply decisions. The group is currently implementing supply cuts totaling 2.2 million barrels per day, with plans to gradually restore output starting in April. However, reports suggest that OPEC+ may consider delaying this process, which could lead to a tighter market than previously anticipated. Such a delay may face opposition from President Trump, who has called for increased OPEC+ production.

Market positioning data indicates a shift in sentiment, with speculators reducing their net long positions in ICE Brent by 23,931 lots, bringing total net longs to 265,223 lots as of last Tuesday. This decline has been driven by a combination of long liquidation and fresh short positions. Additionally, ongoing trade and tariff concerns, along with intensified discussions surrounding a potential Russia-Ukraine peace deal, are adding further uncertainty to the market.Meanwhile, middle distillates continue to show relative strength. The ICE gasoil crack spread remains above $20 per barrel, while the prompt time spread has moved into deeper backwardation, currently trading at more than $14 per barrel. This suggests sustained demand for refined products despite broader market headwinds.