Oil drops on China demand worries, Ukraine peace talk hopes By Reuters

© Reuters. FILE PHOTO: Storage tanks are seen at Marathon Petroleum's Los Angeles Refinery, which processes domestic & imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel, and other petroleum products, in Carson, California, U.S., Ma

MELBOURNE (Reuters) - U.S. crude futures slid in early trade on Tuesday, extending losses from the previous session on the prospect of a sharp drop in fuel demand as Shanghai shut down to curb a surge in COVID cases and as Ukraine and Russia headed for peace talks.

U.S. West Texas Intermediate (WTI) crude futures touched a low of $103.46 a barrel shortly after opening and were down $2.09, or 2%, at $103.87 at 2236 GMT, after dropping about 7% on Monday.

Brent crude futures were poised to open around $3 lower, also after sliding around 7% in the previous session.

Ukraine and Russia were set to meet in Istanbul on Tuesday for their first peace talks in over two weeks. Sanctions imposed on Russia after it invaded Ukraine have curtailed oil supply and earlier this month sent prices to 14-year highs.

Russia calls its actions in Ukraine a "special operation" to disarm its neighbour.

Offsetting concerns about tight supply, Shanghai's two-stage lockdown over nine days is expected to hit fuel demand in China, the world's largest oil importer. The country's financial hub accounts for about 4% of China's oil consumption, ANZ Research analysts said.

Traffic data from Baidu (NASDAQ:BIDU) showed peak morning traffic in the city was down 45% as workers stayed home, ANZ analysts said in a note.

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