Oil prices fell on Thursday on expectations of a Ukraine‑Russia ceasefire which could pave the way for the unwinding of Western sanctions against Russian supply, though trading was set to remain thin due to the U.S. Thanksgiving holiday.
Brent crude futures shed 33 cents, or 0.5%, to $62.8 a barrel as of 0445 GMT, while U.S. West Texas Intermediate crude futures lost 32 cents, or 0.6%, to $58.33 a barrel.
Both contracts settled about 1% higher on Wednesday as investors assessed oversupply risk and the prospect of a Russia-Ukraine peace deal.
U.S. envoy Steve Witkoff is set to travel to Moscow next week with other senior U.S. officials for talks with Russian leaders on a possible plan to end the nearly four-year-old war in Ukraine, the deadliest in Europe since World War Two.
Still, Russia will make no big concessions on a peace plan, a senior Russian diplomat said on Wednesday, after a leaked recording of a call involving Witkoff showed he had advised.
“Oil is inching lower this morning largely on hopes of a Ukraine peace breakthrough and a broader unwinding of the war-premium, but the market still feels thin and directionless ahead of the OPEC+ meeting and the U.S. Thanksgiving lull,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.
The Organization of the Petroleum Exporting Countries and allies are likely to leave output levels unchanged at a meeting on Sunday, three OPEC+ sources told Reuters on Tuesday. Some members of the group, which pumps about half the world’s oil, have been raising production since April to gain market share.
“The real story is that prices remain extremely vulnerable and any serious progress on peace talks would unleash more freely flowing Russian barrels into an already-oversupplied market, keeping crude skewed to medium-term downside with only short-lived spikes,” Sachdeva said.
Meanwhile, limiting crude price declines were rising expectations for a U.S. Federal Reserve interest rate cut in December. A lower rate typically stimulates economic growth and bolsters demand for oil.
“The oil market is stuck between the potential for progress in Russia-Ukraine peace talks and what that would mean for oil supply amid a broader risk-on trade as expectations grow for a December interest rate cut by the U.S. Federal Reserve,” said ING analysts in a client note. Reuters