Oil prices were down on Friday and on pace for a second steep weekly loss, as market participants continued to digest the growing prospects of a peace deal between Russia and Ukraine.
This has also offset concerns about supply disruption in the midst of simmering tension between the US and Venezuela. Together with the Russia-Ukraine talks, these themes have dominated the oil market since last week.
Brent, the benchmark for two thirds of the world's oil, was down 0.25 per cent to $59.67 a barrel as at 11.59am UAE time. West Texas Intermediate (WTI), the gauge that tracks US crude, fell 0.25 per cent to $55.86 per barrel.
From last Friday's close, Brent and WTI have retreated 2.37 per cent and 2.75 per cent respectively. In the year to date, Brent has now given up 20 per cent, while WTI has receded by 22 per cent.
The week's developments have shown signs of extending oil's reduction, as market participants price in a large oversupply for early 2026, said Vijay Valecha, chief investment officer of Dubai-based Century Financial.
Crude prices are “expected to demonstrate strong bearish momentum with the growing prominence of oversupply instead of geopolitical risks”, he said.
“Expectations for a peace settlement between Russia and Ukraine further pressured oil, as markets expect loosening of sanctions and a potential rise in Russian exports, which further support the oversupply theme.”
Negotiations about ending the war in Ukraine have reached a “major moment”, UK Defence Secretary John Healey said this week, despite warnings that the peace deal is an “illusion” that Russia will not accept.
The outcome of high-level talks involving top US envoys in Berlin, where Ukraine appeared to accept that any deal would mean it could not join Nato, has been well received in Washington.
US President Donald Trump hailed potential progress from “very long and very good talks” with Ukrainian President Volodymyr Zelenskyy and the leaders of the UK, France, Germany and Nato.
“I think we’re closer now than we have been ever,” Mr Trump said.
Meanwhile, oil prices rose early on Wednesday as supply concerns increased after Mr Trump ordered a “complete and total” blockade of sanctioned oil tankers moving in and out of Venezuela – part of continuing US military action against the South American country.
The US has bolstered its forces in what Washington says is a campaign to curb illegal drugs. Venezuelan President Nicolas Maduro has accused the White House of attempting to use military pressure to overthrow him.
Caracas has also suggested the US is attempting to get hold of Venezuela's crude reserves, which were estimated at more than 300 billion barrels last year, and are the world's largest. Saudi Arabia is ranked second with 267 billion barrels.
The oil market has also been weighed down by Opec+ moves to boost production, analysts at MUFG Bank have said.
The Opec+ group of producers, led by Saudi Arabia and Russia, last month agreed to keep oil production levels unchanged and approved a mechanism to determine members' maximum output capacity.
Oxford Economics expects the Opec+ output hike pause to be extended to the second quarter of 2026, “dragging on first-half momentum”.
Analysts at the UK-based research firm expect Gulf countries to “resume raising oil supply again in the second half of 2026 and project a full unwinding of the remaining caps on production by mid-2027” .
