Oil prices fell on Tuesday, adding to the previous session’s losses, as prospects for a Russia-Ukraine peace deal appeared to strengthen, raising expectations of a potential easing of sanctions.
Brent crude futures fell 35 cents, or 0.6%, to $60.21 a barrel at 0720 GMT, while U.S. West Texas Intermediate crude was trading at $56.47 a barrel, down 35 cents, or 0.6%.
“Crude oil fell as the market weighed up signs of optimism on a peace deal being reached between Russia and Ukraine,” ANZ analysts said in a note, according to Reuters.
“This raised concerns that recent U.S. sanctions on Russian oil companies would be ultimately lifted, adding to an already well supplied market.”
The U.S. 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, an unprecedented step that sparked optimism that talks were drawing closer to negotiating an end to the conflict. However, a deal on territorial concessions remained elusive.
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.
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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.
The data raised concerns that China’s strategy of relying on exports to offset weak domestic demand may be faltering. A cooling economy would further pressure demand in the world’s largest buyer of oil, where the surging use of electric vehicles is already weighing on petroleum consumption.
Those factors offset concerns about supply after the U.S. seized an oil tanker off the coast of Venezuela last week.
Traders and analysts said a glut of floating storage and a surge in Chinese buying from Venezuela in anticipation of sanctions are also limiting the market impact of the move.
