Oil prices fell during Tuesday's Asian deals, extending losses from the previous session, as signs of progress toward a potential Russia-Ukraine peace deal raised expectations that sanctions on Russian energy exports could eventually be eased, adding to concerns about global supply.
By 3:10 pm AEDT (4:10 am GMT), Brent crude futures were down 36 cents, or 0.6%, at US$60.20 per barrel. U.S. West Texas Intermediate crude fell 34 cents, or 0.6%, to US$56.48 per barrel.
Both benchmarks declined over 3% in the previous session, settling at the lowest levels since May.
“Crude oil fell as the market weighed up signs of optimism on a peace deal being reached between Russia and Ukraine,” ANZ analysts said in a note.
“This raised concerns that recent U.S. sanctions on Russian oil companies would be ultimately lifted, adding to an already well supplied market.”
Optimism around a diplomatic breakthrough followed reports that the United States had offered NATO-style security guarantees for Kyiv, while European negotiators said progress was made in talks on Monday aimed at ending Russia’s war in Ukraine.
The developments marked an unusual step forward in negotiations, although major hurdles remain, particularly around territorial concessions.
ING analysts said geopolitical risks remain significant despite the recent optimism. “President Trump has said that an agreement to end the war in Ukraine is closer than ever, after talks in Berlin. Clearly, territory remains a big sticking point,” they said.
“Oil markets will be watching developments closely, given the significant supply risk from sanctions on Russia. While Russian seaborne oil exports have held up well since the imposition of sanctions on Rosneft and Lukoil, this oil is still struggling to find buyers,” the analysts added.
Weak economic data from China added further pressure to oil prices. Official figures released on Monday showed factory output growth slowed to a 15-month low, while retail sales rose at their slowest pace since December 2022, during the COVID-19 pandemic.
The data fuelled concerns that China’s reliance on exports to offset weak domestic demand may be losing momentum. A cooling economy would weigh further on oil demand in the world’s largest crude importer, where the rapid adoption of electric vehicles is already dampening petroleum consumption.
