Oil prices tumbled on Monday to extend last week’s losses amid reinforced diplomatic efforts to end the Russia-Ukraine crisis.
Markets also braced for higher interest rates ahead of a busy week of central bank meetings.
Brent crude futures for May delivery slumped 3.8 percent to $108.38 a barrel while U.S. West Texas Intermediate (WTI) crude futures were down nearly 5 percent at $104.06 a barrel.
Risk sentiment improved in financial markets as investors pinned hopes for a diplomatic solution to end a weeks-long conflict.
The next round of peace talks is scheduled for today with officials on both sides offering cautious optimism.
“There are certain positive shifts, negotiators on our side tell me,” Russian President Vladimir Putin said in a meeting with his Belarusian counterpart Alexander Lukashenko on Friday.
U.S. Deputy Secretary of State Wendy Sherman said on Sunday that Russia was showing signs it might be willing to have substantive negotiations over Ukraine.
Ukrainian negotiator Mykhailo Podolyak said that Russia was “beginning to talk constructively.”
Meanwhile, China is seeing its worst Covid outbreak in more than two years, raising concerns over demand. The city of Shenzhen has gone into lockdown, whilst other cities are also seeing tougher restrictions.
Investor focus also shifted to major central bank meetings this week amid inflation risks from commodity supply disruptions.
The Federal Reserve is expected to hike interest rates by at least 25 basis points when it hands down its decision on Wednesday.
Similarly, the Bank of England is expected to hike rates for the third time since December when it delivers its rate decision on Thursday.
The Bank of Japan is expected to maintain a dovish stance on Friday, despite rising inflation.