Oil falls as Ukraine signals support for framework of Russia peace deal

Oil prices fell more than 1 percent on Tuesday after Ukraine hinted that the US administration’s intense diplomatic efforts to end Russia’s war against it could bear fruit. An end to the war in Ukraine could lead to an easing of Western sanctions on Moscow’s energy trade, potentially adding more supply at a time when commodity prices have been hit by expectations of a supply glut next year.

Brent crude futures fell 89 cents, or 1.4%, to $62.48 a barrel, while U.S. West Texas Intermediate crude oil futures fell 89 cents, or 1.5%, to $57.95 a barrel. Both indicators reached their lowest levels since October 22 in intraday trading. Kiev’s national security chief Rustam Umerov said Ukrainian President Volodymyr Zelenskiy could visit the United States in the next few days to reach an agreement with US President Donald Trump to end the war.

Onyx Capital Group oil analyst Ed Hayden-Briffet stressed that Russia would still not allow any deal to stray too far from its goals, which he said helped keep oil losses in check as Russia’s position casts doubt on whether a formal agreement will be reached.
The uncertainty became even more evident with Russia’s missile bombardment on Ukraine’s capital, Kiev, on Tuesday, killing six people, injuring 13, and disrupting electrical and heating systems.

“It takes two to tango, and it remains unclear whether Russia agrees,” UBS analyst Giovanni Staunovo said. he said.

Analysts at oil trading consultancy Ritterbusch and Associates warned that the hard part of negotiations to end the war is yet to come and that major gaps between the parties must be filled.

WORSING GLUT

A growing consensus among experts predicts that increases in crude oil supply will exceed increases in demand in 2026. Deutsche Bank sees a surplus of at least 2 million barrels per day next year, with no clear path for a return to deficits even until 2027, it said in a note published Monday. Analysts at Commerzbank Research said a peace deal could help Russia increase oil production to the agreed OPEC+ volume. Sanctions imposed on Russian oil giants Rosneft and Lukoil and rules against selling oil products refined from Russian crude to Europe have pushed some Indian refiners to reduce their purchases of Russian oil.

Commerzbank noted that this has led to a decrease in Russia’s oil exports and an increase in crude oil from Russia stored in tankers at sea, which would be possible in the event of a peace agreement that would result in the lifting of sanctions against Rosneft and Lukoil. Russia is also discussing ways to increase exports to China, Russian Deputy Prime Minister Alexander Novak said on Tuesday.

US crude oil inventories fell last week while fuel inventories increased, market sources said Tuesday, citing American Petroleum Institute figures. A Reuters poll previously estimated US crude inventories rose by 1.86 million barrels in the week ending Nov. 21.

Official stockpile data from the Energy Information Administration will be released at 10:30 a.m. ET (1530 GMT) on Wednesday.