Oil prices were largely stable in Asian trading on Monday after sharp weekly losses of around 3%, as markets assessed the prospects for a possible peace deal in Ukraine and new US sanctions on Russian oil exports.
As of 04:50 Saudi time, Brent crude futures expiring in January were down 0.2% at $62.45 a barrel, while West Texas Intermediate (WTI) crude futures were down 0.3% at $57.91 a barrel.
Both contracts fell by more than 1% on Friday to their lowest levels in a month, resulting in weekly declines of about 3%.
Prospects for a peace agreement in Ukraine are putting pressure on oil prices.
The United States and Ukraine have agreed on an updated and revised peace framework for the conflict with Russia. Under the revised plan, Kyiv and Washington accepted changes to a previous 28-point draft, which Ukraine and its allies criticized as being too sympathetic to Moscow.
If the agreement is reached, it could open the door to a return of Russian oil flows due to the lifting of sanctions, which could lead to a larger surplus in supply.
ING analysts said in a note: “An agreement is unlikely anytime soon. Sticking points will likely include Ukraine having to relinquish territory and reduce the size of its military. In addition, Ukraine will demand clear and explicit security guarantees as part of any agreement.”
Sanctions against Russian oil companies came into effect last week.
At the same time, attention remains focused on the new US sanctions against the Russian oil companies Rosneft and Lukoil, which came into effect on 11/21/2023 .
These measures cut off the main routes for Russian crude oil exports and restrict global buyers and banks from dealing with these giant companies.
However, sanctions may also support prices through the risk of tighter supplies, even as peace deal speculation pushes them down.
ING analysts wrote: Developments relating to a possible peace agreement are important for the oil market, especially given the considerable uncertainty about the impact of the recently imposed sanctions on Russian companies Rosneft and Lukoil.
They added: It is clear that the peace agreement increases the likelihood of lifting the sanctions, or at least not enforcing them strictly.
