Oil Prices Dip as Markets Watch Ukraine Peace Talks and U.S. Rate Decision

Oil prices slipped on Tuesday, extending the previous session’s losses as traders assessed geopolitical developments, rising global supply, and the upcoming U.S. Federal Reserve interest rate decision. Brent crude settled at $61.94 per barrel, down $0.55, while U.S. West Texas Intermediate (WTI) dropped $0.63 to close at $58.25. Both benchmarks had already declined more than $1 on Monday after Iraq resumed production at Lukoil’s West Qurna 2 oilfield, one of the largest in the world, adding further pressure to an already oversupplied market.

Investors are closely watching renewed diplomatic efforts surrounding Russia’s war in Ukraine. President Volodymyr Zelenskiy is expected to present a revised peace plan to the United States following talks in London with leaders from France, Germany, and the U.K. A potential peace deal could trigger the easing of sanctions on Russian companies and release previously restricted oil supply. However, analysts remain skeptical, with some warning that Russia may not be fully committed to meaningful negotiations.

Meanwhile, fresh Russian attacks left roughly half of Kyiv without power on Tuesday, underscoring the fragile situation on the ground. Western policymakers are weighing additional measures to curb Moscow’s oil revenue, with the G7 and European Union considering replacing the current Russian oil price cap with a comprehensive maritime services ban.

Analysts also continue to flag concerns over the growing number of oil cargoes at sea, which have surged by 2.5 million barrels per day since mid-August. This buildup has intensified downward pressure on crude prices, though U.S. sanctions on Rosneft and Lukoil have prevented an even steeper decline.

Markets now turn to the upcoming International Energy Agency’s December oil report, which is expected to provide further clarity on supply trends. If the agency maintains its forecast for a future market surplus, WTI could slide toward the $56.80–$57.50 support range. Traders are also awaiting U.S. inventory data, after the American Petroleum Institute reported a 4.78-million-barrel draw in crude stocks and significant builds in gasoline and distillates.

Attention is also focused on the Federal Reserve, with markets pricing in an 87% chance of a quarter-point rate cut. Lower interest rates typically support oil demand by reducing borrowing costs, though analysts caution the immediate impact on prices may be limited.