(Bloomberg) — Oil edged lower after Russia’s offer to cut back military operations around Ukraine’s capital offered a tenuous path forward for the two nations.

New York futures fell 1.6% Tuesday. This is a significant drop from the initial plunge below $100 per barrel early in session. West Texas Intermediate futures fell more than 7 percent after Moscow announced it would cut military operations in Kyiv, and indicated that they were open to a presidential meeting with Volodymyr Zelenskiy and Vladimir Putin. The talks between negotiators ended in a halt-fire, and the U.S. warned against declaring any progress.

“We are still in a $100 environment, no question,” said Paul Sankey of Sankey Research on Bloomberg Television. China’s continuing lockdowns are also relieving some pressure, but markets remain volatile, he said. “China is taking heat out of the market, but if the heat comes back, that adds $10” a barrel.

Since Moscow invaded Ukraine in 2014, oil prices have risen to $100 per barrel. The ensuing sanctions against Russia caused severe price swings on the oil market and made investors wary about trading. WTI fluctuated an average of $9 per session during March.

“Fundamental traders and investors have taken their chips off the table in crude due to extremely high volatility, leaving the primary players in the market to be traders looking to hedge geopolitical risks,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. 

Following the conclusion of talks between Russian and Ukrainian negotiators in Istanbul, U.S. Secretary of State Antony Blinkin expressed skepticism about Russia’s promise to de-escalate its military activities around Kyiv. “There is what Russia says and there is what Russia does,” he told reporters. 

China is still struggling with the largest Covid epidemic since the outbreak. Consultant Rystad Energy stated in a report that the latest Shanghai restrictions could reduce oil demand by up to 200,000 barrels per day over the course of the restrictions.

The industry-funded American Petroleum Institute announced late Tuesday that supply had dropped by 3,000,000 barrels last week according to those familiar with the data. Data also revealed that stockpiles from Cushing, Oklahoma (the largest U.S. storage center), fell by around 1.06million barrels. On Wednesday, the U.S. government is expected to release its weekly inventory count.

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