Oil prices experienced a significant decline on Tuesday after reports emerged of a possible U.S.-mediated peace agreement between Ukraine and Russia, fueling speculation that Western sanctions on Moscow's energy exports might be lifted. Brent crude futures dropped by 2.3% to $61.92 per barrel, while West Texas Intermediate (WTI) crude decreased 2.5% to $57.40 per barrel,
as reported by Reuters
. The price drop followed news that Ukrainian President Volodymyr Zelenskiy could soon travel to the U.S. to finalize the deal, although Russian authorities have yet to confirm their approval of the proposed terms
as reported by Reuters
.
The market's reaction highlights wider concerns about a potential influx of Russian oil if sanctions are removed. Over the weekend, U.S. and Ukrainian representatives met in Geneva,
reducing a 28-point peace proposal to 19 points
, while Russian negotiators held separate talks in Abu Dhabi.
Experts observed
that a peace agreement could enable Russia to ramp up output to OPEC+ quotas and release oil currently stored in tankers offshore, which has built up due to limits on sales to European buyers.
Despite some positive sentiment, doubts remain.
Russia has insisted
it will not yield on its military objectives, and a wave of missile attacks on Kyiv on Tuesday highlighted the delicate nature of ongoing diplomacy. "It takes both sides to reach an agreement, and it's still uncertain whether Russia will consent,"
UBS analyst Giovanni Staunovo commented
. At the same time,
Deutsche Bank cautioned
that even with a peace deal, a global oil surplus of at least 2 million barrels per day is projected for 2026, with no clear solution for rebalancing before 2027.
The prospect of relaxed sanctions has also led to changes in other commodity markets.
European benchmark gas futures dipped below €30
per megawatt-hour for the first time in over a year, as traders anticipated less competition from Russian oil and gas. Industrial metals such as copper and aluminum, which surged at the war's outset, have responded variably as global trade flows adjust.
A peace agreement might reopen
Western markets to Russian suppliers, but analysts warn that ongoing geopolitical tensions and long-term trends like China's gold accumulation could dampen demand.
Analyze the historical performance of OIL indices using the MACD Golden Cross strategy from 2022 to the present.
Recent actions by India and China
to reduce Russian oil purchases have been influenced by U.S. sanctions targeting Rosneft and Lukoil.
Analysts at Commerzbank pointed out
that Russian oil exports have fallen, with more crude being stored in tankers, which could flood the market if restrictions are lifted. Meanwhile,
Russian authorities have attempted
to boost shipments to China, indicating a strategic shift should Western sanctions persist.
With traders preparing for continued market swings, the outlook for peace remains unpredictable. While the U.S. and Ukraine press on with talks, Russia's position and the risk of renewed conflict have kept oil prices unstable. "The outlook for 2026 is still bearish,"
Deutsche Bank analyst Michael Hsueh stated
. For now, investors are closely monitoring for any developments—positive or negative—in the ongoing Ukraine conflict.
