Oil price dips as Ukraine-Russia ceasefire talk eases supply concerns

Global oil prices edged lower on Thursday, with markets reacting to growing talk of a possible pause in the war between Ukraine and Russia. Traders believe a ceasefire could calm fears about disruptions in Russian oil exports, and may even lead to a rethink of Western sanctions on Moscow’s energy sector.

Early in the Asian trading window, Brent crude was changing hands at around $62.92 a barrel, down 21 cents, a dip of 0.3 percent. US West Texas Intermediate also lost 21 cents, settling near $58.44 a barrel, about 0.4 percent lower. A day earlier, both contracts had finished roughly 1 percent higher, lifted by concerns about oversupply and cautious optimism around peace talks.

Trading volumes remained lighter than usual as energy desks in the US shut early ahead of the Thanksgiving holiday. With fewer market players active, analysts said price movement might stay narrow until next week.

Senior US officials, including special envoy Steve Witkoff, are reportedly preparing for discussions in Moscow next week. The talks are expected to explore ways to end a conflict that has reshaped Europe for nearly four years, causing one of the worst humanitarian and economic shocks the region has seen since the Second World War.

On Wednesday, a Russian diplomat, speaking after a leaked audio recording raised eyebrows in Washington, signalled that Moscow would likely resist far-reaching compromises. Despite the guarded tone, markets are choosing to watch, rather than panic.

Sanctions impact already visible

“Any pause in hostilities reduces the sense of risk around Russian supply, especially after the latest US sanctions came into force on November 21,” said Commonwealth Bank of Australia market analyst Vivek Dhar. He added that the penalties targeting Russian oil giants Rosneft and Lukoil have already slowed refined product shipments and altered export flows.

Dhar suggested that if calm prevails, Brent could drift toward $60 a barrel in short order. “A deal also means fewer drone attacks on refineries, which could bring Russian processing activity back to more typical levels,” he said.

Inventories and rigs add pressure

Another weight on sentiment came from US stockpile figures released on Wednesday. The Energy Information Administration reported that US crude inventories climbed by 2.8 million barrels last week, reaching 426.9 million barrels. The rise was far above expectations, as imports jumped to their highest in 11 weeks. Analysts had predicted a modest increase of just 55,000 barrels.

Separately, oilfield services firm Baker Hughes noted that US energy companies had reduced the active oil rig count by 12, taking the total to 407, the lowest since September 2021. Market watchers interpreted the cutback as a sign of comfortable supply conditions, rather than a slowdown panic.

OPEC+ holds the line

Meanwhile, leading producers in the OPEC+ alliance are expected to keep their current output targets unchanged when the group meets on Sunday. Some members have been quietly raising production since April in an attempt to protect market share in an environment of softer global demand.

Rate cut hopes offer a floor

If there was a glimmer of support, it came from central bank talk. Growing expectations of a US Federal Reserve interest rate reduction in December encouraged some bargain hunters. Traditionally, cheaper borrowing costs can energise economic activity and make fuel spending easier for businesses and households.