Oil Prices Decline as Peace Talks Progress and U.S. Rate Decision Looms
Oil prices fell during trading on Tuesday, continuing the downward trend from Monday. Traders are closely monitoring developments in the peace negotiations in Ukraine while also anticipating the U.S. Federal Reserve's upcoming decision on interest rates.
Brent crude futures dropped by 0.2%, settling at $62.34 per barrel, while West Texas Intermediate crude decreased by 0.3%, reaching $58.70 per barrel. This decline follows significant losses on Monday, when prices fell sharply after Iraq announced the resumption of production at the West Qurna 2 field, operated by Lukoil.
Priyanka Sachdeva, Senior Market Analyst at Phillip Nova, commented on the market dynamics: "The drop in Brent towards $62 aligns with the broader scenario for December." She noted that the initial concerns surrounding potential disruptions in Iraq quickly dissipated, allowing the market to refocus on the prevailing factors of ample supply and cautious demand expectations, as reported by Reuters.
On the geopolitical front, Ukraine is set to present an updated peace plan to the United States after consultations held by President Volodymyr Zelensky with leaders from France, Germany, and the UK. Tim Waterer, Senior Market Analyst at KCM Trade, stated, "Oil prices are likely to remain within a narrow range until there is more clarity on the peace talks." He added that a collapse in negotiations could lead to rising oil prices, whereas progress might open the door for resuming Russian oil supplies, potentially lowering prices.
Additionally, sources indicate that the Group of Seven and the European Union are exploring new strategies to increase pressure on Russia's oil revenues, including discussions to replace the existing price cap on Russian oil exports with a comprehensive ban on maritime services related to oil transport.
In Washington, global markets are keenly awaiting the U.S. Federal Reserve's decision on monetary policy and interest rates scheduled for Wednesday. Current market estimates suggest an 87% probability of a 25 basis point reduction in the main interest rate, a move that could significantly influence investment trends and global energy demand expectations.
