Crude drops below $60 as Russia-Ukraine peace hopes weigh on prices

Oil prices fell more than $1 on Tuesday to below $60 a barrel - the lowest since May this year - as prospects for a Russia-Ukraine peace deal appeared to strengthen, raising expectations of a potential easing of sanctions.

 

Brent crude futures fell $1.11, or around 1.8 per cent, to $59.45 a barrel at 1023 GMT, while US West Texas Intermediate crude was trading at $55.71 a barrel, down $1.11, or nearly 2 per cent.

 

"Brent has dropped this morning to below $60 per barrel for the first time in months, as the market assesses a potential peace deal resulting in additional Russian volumes becoming available and oversupplying the market further," said Rystad analyst Janiv Shah.

   

The US offered to provide NATO-style security guarantees for Kyiv and European negotiators reported progress in talks on Monday to end Russia's war in Ukraine, sparking optimism that an end to the conflict was closer.

 

Russia, meanwhile, said it was not willing to make any territorial concessions in talks on ending the Ukraine war, state news agency TASS quoted Deputy Foreign Minister Sergei Ryabkov as saying.

 

"The grind in talks will be matched with the continued grind lower in prices as we enter 2026 with all it associated predictions of 'glut.' Brent will make a fresh year-to-date low, but will not break below $55 a barrel before the year is out," said PVM Oil Associates analyst John Evans.

 

Adding to the pressure, soft Chinese economic data released on Monday further fuelled concerns that global demand may not be strong enough to absorb recent supply growth, said IG market analyst Tony Sycamore in a note.

 

China's factory output growth slowed to a 15-month low, official data showed. Retail sales also grew at their slowest pace since December 2022, during the COVID-19 pandemic.

 

Fears of an oversupply were marginally offset by the US seizing an oil tanker off the coast of Venezuela last week, but traders and analysts said a glut of floating storage and a surge in Chinese buying from Venezuela in anticipation of sanctions were also limiting the market impact of the move.