Oil Falls as Traders Weigh Ukraine Peace Efforts and Imminent Fed Rate Cut

Oil prices moved lower on Monday as traders tracked slow-moving efforts to end the war in Ukraine and positioned ahead of a widely expected U.S. Federal Reserve rate cut later this week.

By 10:53 GMT, Brent crude futures were down $0.57 (0.9%) at $63.18 a barrel, while U.S. West Texas Intermediate (WTI) slipped $0.60 (1.0%) to $59.48.
Both benchmarks had settled on Friday at their highest levels since November 18.

Ukraine talks keep supply risks finely balanced

The market softened as investors assessed the potential impact of ongoing Ukraine peace talks on future Russian oil flows.

“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.

Progress remains slow. Disputes over security guarantees for Kyiv and the status of Russian-occupied territories are unresolved, while Washington and Moscow still differ over the U.S.-backed peace framework.

Ukrainian President Volodymyr Zelenskiy is due to meet European leaders in London on Monday.
ANZ analysts noted that potential outcomes from the latest diplomatic push could swing global oil supply by more than 2 million barrels per day, depending on whether sanctions are eased or intensified.

Commonwealth Bank of Australia analyst Vivek Dhar described a ceasefire as the main downside risk for prices, while sustained damage to Russian energy infrastructure remains a key upside risk. He added that oversupply concerns are likely to materialize over time as Russian crude and refined products gradually circumvent sanctions, with futures expected to trend toward $60/bbl through 2026.

Fed cut expectations and new sanctions risk in focus

Markets are also looking to the Federal Reserve’s policy meeting on Tuesday and Wednesday, with LSEG data showing traders pricing in an 84% chance of a 25-basis-point rate cut.

However, recent comments from Fed officials suggest the gathering could be one of the most divisive in years, heightening attention on the bank’s forward guidance and internal policy rift.

On the sanctions front, G7 nations and the European Union are reportedly discussing scrapping the current Russian oil price cap and replacing it with a full maritime services ban, a move that could further restrict exports from the world’s second-largest oil producer.

The U.S. has simultaneously increased pressure on Venezuela, including strikes on vessels accused of drug smuggling and renewed talk of potential military action against President Nicolás Maduro, adding another layer of geopolitical risk within OPEC.

Elsewhere, Chinese independent refiners have stepped up purchases of sanctioned Iranian crude from onshore storage tanks, aided by fresh import quotas, helping to ease localized supply gluts but adding complexity to the broader supply picture.