Oil fell as traders assessed the prospect of a Ukraine-Russia peace deal that would add supply to a saturated market, with reports emerging that the US threatened to stop supporting Kyiv unless it agrees to a pact that favors Moscow.
The newly-active January West Texas Intermediate contract fell about 1.6% to settle near $58 a barrel, its fourth day down out of five. Prices pared some losses after President Donald Trump said he would not remove sanctions on Russia as talks continue. Curbs on the country’s two largest oil producers went into effect on Friday.
Despite those sanctions taking hold without delay and Ukraine’s top European allies rejecting key parts of the US-Russian peace plan, markets are preparing for a deal, said Gregory Brew, a geopolitical analyst at the Eurasia Group.
“The market is pricing in this peace plan, which appears to have more US energy behind it than was apparent earlier in this week,” Brew said.
Trump, speaking on Fox News Radio, said he thinks Thursday is “an appropriate” deadline for Ukraine to agree to the US-proposed peace plan with Russia.
Even if the pressure campaign doesn’t yield a pact, traders remain skeptical of concrete impacts from the sanctions, Brew said. Trump’s changing tone has underscored that perception, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
“Regardless of whether a deal is ultimately reached, confidence in strict sanctions enforcement is fading,” Babin said. “As a result, shorts are adding to positions, betting that even without a deal, the rhetoric suggests Trump may be stepping back from actions that would materially impact crude and product flows.”
Trend-following commodity trading advisers went completely short on WTI and Brent on Friday for the first time since May, according to data from Bridgeton Research Group.
If there is progress on a peace deal and sanctions are lifted, that would add more supply to a market already facing a large surplus next year. OPEC+ and other producers, notably in the Americas, have boosted output, leaving oil futures on track for an annual loss. Drilling rigs targeting crude oil in the US rose by 2 this week, according to Baker Hughes.
Oil pared losses earlier Friday after the leaders of France, Germany and the UK agreed on a call with Ukrainian President Volodymyr Zelenskiy that Ukraine’s armed forces must remain capable of defending its sovereignty, rejecting key elements of the US-Russian plan to end the war.
Oil Prices
WTI for January delivery fell 1.6% to settle at $58.06 a barrel in New York.
Brent for January settlement dropped 1.3% to settle at $62.56.
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