Market Analysis

Oil Drops Amid Speculation Peace Talks Could Ease Supply Issues

Amos Simanungkalit · 17 Feb12.1K Views

Image Credit: Reuters

Oil prices dropped for the fourth consecutive day on Monday, as expectations of a potential Russia-Ukraine peace agreement raised hopes for eased sanctions and improved supply flows. Concerns over global tariff wars slowing economic growth and weakening energy demand also weighed on prices.

Brent crude futures fell by 20 cents, or 0.2%, to $74.59 per barrel by 0112 GMT, having dropped 3.1% over the past four sessions. This decline follows announcements from U.S. President Donald Trump and his administration about beginning discussions with Russia to end the war in Ukraine.

U.S. West Texas Intermediate (WTI) crude dropped 23 cents, or 0.3%, to $70.51 per barrel, hitting a low of $70.12 earlier in the session—its lowest level since December 30. WTI has fallen 3.8% in the past four sessions.

Trump commented on Sunday that he expects to meet with Russian President Vladimir Putin "very soon" to discuss ending the war. This follows U.S.-Russia talks scheduled in Saudi Arabia in the coming days.

U.S. Secretary of State Marco Rubio also indicated that Ukraine and Europe would be part of any negotiations aimed at ending the conflict, suggesting that the talks would gauge Putin’s seriousness about peace.

"Markets are down due to expectations of a ceasefire and potential sanction relief on Russia," said Hiroyuki Kikukawa, president of NS Trading. "Concerns about an economic slowdown caused by tariff wars are also pressuring prices," he added, forecasting WTI to trade between $66 and $76 for some time, as further price declines may reduce U.S. oil production.

Sanctions from the U.S. and the EU on Russian oil exports have reduced shipments and disrupted seaborne oil supply. If sanctions are lifted following a peace deal, global energy supplies could increase. The risk of a global trade war also continues to weigh on prices, with Trump last week instructing officials to study reciprocal tariffs against countries that impose tariffs on U.S. goods, with recommendations due by April 1.

Meanwhile, U.S. energy companies added oil and natural gas rigs for the third consecutive week, according to a Baker Hughes report. The oil and gas rig count rose by two to 588 in the week ending February 14.