HOUSTON: Oil prices slid 1.5 percent on Monday as investors weighed ongoing talks to end the war in Ukraine and an expected US Federal Reserve interest rate cut this week.
Brent crude futures were down 93 cents, or 1.46 percent, at USD62.82 a barrel by 11:32 a.m. EDT (1633 GMT), while US West Texas Intermediate crude was at USD59.17, down 91 cents, or 1.51 percent.
Prices marginally pared losses after sources told Reuters that Iraq had shut down the entire oil production at Lukoil’s West Qurna 2 field of around 460,000 barrels per day due to a leak on an export pipeline. Both contracts closed Friday’s trading session at their highest levels since November 18.
“If there’s any kind of agreement reached in the near future on Ukraine, then Russian oil exports should increase and put downward pressure on oil prices,” said Tamas Varga, oil market analyst at PVM.
Markets are meanwhile pricing in an 84 percent chance of a quarter-point cut at the Fed meeting on Tuesday and Wednesday, LSEG data showed.
However, board member comments indicate the meeting is likely to be one of the most divisive in years, intensifying investor focus on the bank’s policy direction and internal dynamics.
Progress on Ukraine peace talks remains slow, with disputes over security guarantees for Kyiv and the status of Russian-occupied territory still unresolved even as US President Donald Trump presses for a deal.
Ukrainian President Volodymyr Zelenskiy was meeting European leaders in London on Monday.
“The various potential outcomes from Trump’s latest push to end the war could release a swing in oil supply of more than 2 million barrels per day,” ANZ analysts said in a client note.
Any geopolitical risk premium will be weighed against signs of a growing global surplus, with rising OPEC+ and non-OPEC supply outpacing modest demand growth, Aegis Hedging analysts said in a note on Monday.
Commonwealth Bank of Australia analyst Vivek Dhar said a ceasefire is the main downside risk to the outlook for oil prices, while sustained damage to Russia’s oil infrastructure is a significant upside risk. In the meantime, Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban, people familiar with the matter told Reuters.
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