Brent crude futures fell 79 cents, or 0.8%, to $ 103.60 a barrel at 0037 GMT while US West Texas Intermediate crude was at $ 98.45 a barrel, down 82 cents, or 0.8%. Both contracts slipped $ 1 when markets opened on Monday.
The United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict. Saudi oil facilities have come under attack by the Houthis during the conflict, adding to supply disruption from Russia.
“This was a threat to supply, and a ceasefire would reduce that threat to supply,” said Phil Flynn, an analyst at Price Futures Group.
Oil and gas condensate production at the world No. 2 exporter fell to 11.01 million barrels per day (bpd) in March, from an average output of 11.08 million bpd in February, industry sources said. Russian oil refining and exports have been hit by Western sanctions and buyer aversion following Russia’s invasion of Ukraine. Estimates of the Russian oil supply loss ranges from 1 million to 3 million bpd.
Oil prices slumped about 13% last week after US President Joe Biden announced that up to 1 million bpd of oil will be sold from the US Strategic Petroleum Reserve (SPR) for six months starting in May. Biden said the release, the third in the past six months, will serve as a bridge until domestic producers can boost output and bring supply back into balance with demand.
The US Energy Department formally outlined a sale of oil from emergency reserves while members of the International Energy Agency also agreed to release more oil on Friday.
“The joint efforts of the US and its allies could temporarily balance off supply shortfalls in 2022, but it might not be a long-term solution,” said Tina Teng, a markets analyst at CMC Markets APAC & Canada in a note.
“Also, the US oil producers may be reluctant for an output increase to keep profit high.”
Despite calls from Biden for US energy firms to ramp up production, growth in rig count remains slow as drillers continue to return cash to shareholders from high crude prices rather than boost production.
Demand concerns at China, the world’s top oil importer, persist as its most populous city Shanghai has extended COVID-19 lockdowns.
China’s transport ministry expects a 20% drop in road traffic and a 55% fall in flights during the three-day Qingming holiday due to a flare-up of COVID-19 cases in the country.