Oil slides to five-year low on Ukraine talks and supply glut fears
The decline followed remarks by Ukrainian President Volodymyr Zelensky, who on Monday welcomed what he described as “progress” in negotiations with the United States aimed at ending the war with Russia — a development that could eventually ease sanctions on Russian oil.
Oil prices fell sharply on Tuesday, with U.S. benchmark West Texas Intermediate (WTI) dropping to its lowest level in nearly five years, pressured by optimism over progress in Ukraine peace negotiations and growing concerns about a global supply surplus.
At around 16:00 GMT, WTI crude for January delivery declined 2.64% to $55.32 a barrel, after earlier touching $54.98 — its lowest level since February 2021.
Brent crude, the European benchmark for February delivery, fell 2.53% to $59.03 a barrel, slipping below $60 for the first time since May, reports Al-Rai daily..
The decline followed remarks by Ukrainian President Volodymyr Zelensky, who on Monday welcomed what he described as “progress” in negotiations with the United States aimed at ending the war with Russia — a development that could eventually ease sanctions on Russian oil.
U.S. President Donald Trump also said an agreement was closer than ever.
Analysts said any breakthrough could significantly alter oil supply dynamics. According to the International Energy Agency, Russia’s oil exports fell by about 420,000 barrels per day in November due to U.S. sanctions and Ukrainian drone strikes. A potential agreement could pave the way for larger volumes of Russian oil to return to global markets.
“Progress in peace talks is reducing the geopolitical risk premium that has supported oil prices,” analysts at DNB Bank said. However, some caution remains, with Hargreaves Lansdown analyst Derren Nathan noting that previous attempts at negotiations this year have failed to deliver lasting results.
Markets are also increasingly focused on supply-demand fundamentals. Kathleen Brooks of XTB said concerns over an expected surplus, alongside signs of supply outpacing demand in the Gulf region and the United States, are weighing heavily on prices.
Immediate deliveries of Middle Eastern crude are currently trading at a discount to later contracts, signaling a short-term supply glut. With storage costs remaining high, traders have little incentive to stockpile oil unless margins improve significantly.
Meanwhile, lingering uncertainty over demand growth, combined with higher production quotas set by the Organization of the Petroleum Exporting Countries and its allies (OPEC+), continues to add downward pressure on crude prices.
