Brent crude futures settled down US$1.64 a barrel, off roughly 2.71%, to US$58.92 a barrel, while US West Texas Intermediate crude closed at US$55.27, down US$1.55, or 2.73%.
DENVER: Oil futures settled at their lowest level since February 2021 on Tuesday amid ongoing jitters surrounding oversupply and as the prospect of a Russia-Ukraine peace deal appeared to strengthen, raising expectations sanctions could be eased.
Brent crude futures settled down US$1.64 a barrel, off roughly 2.71%, to US$58.92 a barrel, while US West Texas Intermediate crude closed at US$55.27, down US$1.55, or 2.73%.
"Brent has dropped this morning to below US$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, sparking optimism that an end to the war was closer. Russia, meanwhile, said it was not willing to make any territorial concessions, state news agency TASS quoted Deputy Foreign Minister Sergei Ryabkov as saying.
The six-month Brent futures spread moved into a contango for the first time since October.
Barclays analysts expect Brent to average US$65/bbl in 2026, slightly ahead of the forward curve, due to the expected 1.9 million bpd surplus they see as being priced in already.
"This price decline underscores the structural dynamics of today’s energy market-ample supply and sluggish demand. Unless geopolitical risks or policy shifts intervene, this softness could persist well into next year," KPMG US Energy Strategy Leader Angie Gildea wrote in a note.
Adding to the pressure, soft Chinese economic data on Monday further fuelled concerns that global demand may not be strong enough to absorb recent supply growth, said IG market analyst Tony Sycamore.
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 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. — Reuters
