On Monday (March 24th), oil prices slightly weakened as investors assessed the prospects of the Russia Ukraine ceasefire negotiations, which could increase the supply of Russian oil to the global market.

Brent crude oil futures are currently down 0.33%, at $71.89 per barrel. US crude oil futures are currently down 0.31%, at $68.07 per barrel.

Due to the new sanctions imposed by the United States on Iran and the expected tightening of supply caused by OPEC+'s latest production plan, both major crude oil indicators closed higher on Friday and recorded their second consecutive week of gains.

1、 Russia Ukraine ceasefire talks: expected increase in supply suppresses oil prices

The US delegation held talks with Russian officials on Monday aimed at promoting a ceasefire in the Black Sea and a broader ceasefire agreement in the Ukrainian conflict. This negotiation progress may pave the way for Russian oil to return to the global market, thereby increasing supply and suppressing oil prices.

Fujitsu Securities analyst Toshitaka Tazawa pointed out that the positive progress of the Russia Ukraine peace talks and the expectation that the United States may relax sanctions on Russian oil are the main reasons for the decline in oil prices. However, investors are cautious about the uncertainty of OPEC+'s future production policy, which has limited the decline in oil prices.

2、 OPEC+Production Reduction Plan: The 'Sea God Needle' Supporting Oil Prices

Despite the expected increase in supply brought about by the Russia Ukraine ceasefire negotiations, OPEC+'s production reduction plan has provided important support for oil prices. OPEC+released a new plan on Thursday, requiring seven member countries to further cut oil production to make up for the mining output that exceeds the agreed level. This measure will exceed the monthly production increase plan originally scheduled to be launched by OPEC+in April.

Since 2022, OPEC+has agreed to reduce production by 5.85 million barrels per day, equivalent to 5.7% of global supply, in order to stabilize the market. Although OPEC+plans to increase production by 138000 barrels per day per month starting from April, its overall production reduction policy still provides solid bottom support for oil prices.

3、 US sanctions on Iran: short-term disturbances and long-term impacts

Market participants are also paying attention to the impact of the new sanctions imposed by the United States on Iran. After the United States imposed sanctions on a refinery and multiple oil tankers, Iran's oil transportation volume to China may decrease in the short term, pushing up transportation costs. However, traders expect buyers to find alternative ways to maintain at least a certain amount of transportation, which weakens the long-term impact of sanctions on oil prices.

Conclusion: Oil prices seek direction in the game

Currently, oil prices are oscillating between the expected increase in supply brought about by the Russia Ukraine ceasefire negotiations and the support of OPEC+production reduction policies. In the short term, market sentiment may continue to be influenced by geopolitical events and OPEC+policies. In the future, investors need to closely monitor the progress of negotiations between Russia and Ukraine, OPEC+production policies, and the subsequent impact of US sanctions on Iran to seize opportunities for oil price fluctuations.