Onome Amuge
Oil prices fell on Wednesday as renewed geopolitical negotiations and lingering concerns over a potential supply glut dragged benchmark crude futures to multi-month lows.
Brent crude slipped 2.65 per cent to $63.17 a barrel in afternoon trading, erasing gains from the previous session, while U.S. West Texas Intermediate dropped 2.72 per cent to $59.09. The declines followed a report that Washington had presented Moscow with proposals aimed at ending its war in Ukraine; a development that, if successful, could recast expectations about future energy supply risks.
A senior Ukrainian official told Reuters that Kyiv had received signals about a series of U.S. ideas discussed with Russia and that President Volodymyr Zelensky would pursue a fresh diplomatic push in the coming days. Zelensky is expected to hold talks in Turkey on Wednesday and meet U.S. Army officials in Kyiv on Thursday, moves seen as part of an effort to revive stalled peace discussions.
Analysts said markets were reacting swiftly to even tentative indicators of progress. “Successful peace talks would reduce oil supply risks,” said Ole Hansen, head of commodity strategy at Saxo Bank. The war, now in its third year, has injected repeated bouts of volatility into oil markets, particularly as Western sanctions on Moscow have sought to squeeze Russia’s export earnings without destabilising supply.
Yet Moscow pushed back against the notion that sanctions had affected output. Russian deputy prime minister Alexander Novak said U.S. measures announced in October against Rosneft and Lukoil had not dented production levels. Washington argues the sanctions, which become fully enforceable on November 21 when a wind-down licence issued by the Office of Foreign Assets Control expires, are beginning to constrain Russia’s export volumes. China and India, two of Moscow’s key buyers, have already started shifting to alternative suppliers, the U.S. Treasury said this week.
Janiv Shah, an oil analyst at Rystad Energy, said the looming compliance deadline had added a layer of uncertainty to an already unsettled market. “There is maximum pressure right now as Friday’s deadline is looming. A lower geopolitical risk premium would leave investors focusing more closely on weak market fundamentals,” he said.
Those fundamentals have become increasingly difficult to ignore. Traders are growing concerned about a possible supply overhang heading into the first quarter of next year, driven by resilient output from non-OPEC producers and a softening demand outlook in Europe and parts of Asia.
“The risk of a supply glut continued to weigh on prices,” Saxo Bank’s Hansen said, noting that the combination of moderating demand and elevated inventories was prompting some investors to unwind bullish positions.
Oil windfall expectations from the Middle East crisis