Oil prices declined on Monday, continuing the downward trend from the previous week, as negotiations for peace between Russia and Ukraine progressed towards a resolution, coupled with a strengthening of the U.S. dollar. Brent crude futures experienced a decline of 14 cents, equivalent to 0.22%, settling at $62.42 per barrel as of 0148. West Texas Intermediate declined by 15 cents, representing a decrease of 0.26%, settling at $57.91 per barrel. Both crude benchmarks experienced a decline of approximately 3% last week, reaching their lowest settlements since October 21. This downturn was driven by concerns among market participants that a potential peace agreement between Russia and Ukraine could lead to the lifting of sanctions on Moscow, thereby inundating the market with previously restricted supply. “The sell-off was triggered mainly by President Trump’s forceful push for a Russia-Ukraine peace deal, which markets perceive as a fast track to unlocking substantial Russian supply,” analyst noted in a report.

He noted that the progress towards a peace agreement significantly surpassed the short-term impact of the U.S. sanctions on Rosneft and Lukoil that were implemented on Friday. Nearly 48 million barrels of Russian crude remain stranded at sea due to the sanctions imposed. On Sunday, the U.S. and Ukraine reported advancements in their discussions regarding a peace plan that would necessitate the war-affected nation to relinquish territory and reconsider its aspirations to join NATO. The deadline set by U.S. President Donald Trump is this Thursday, while European leaders advocate for a more favorable agreement.

A peace agreement may lead to the reduction of sanctions that have restricted Russian oil exports. In 2024, Russia ranked as the second-largest producer of crude oil globally, following the United States, as per reports. The prospect of increased oil supply entering the market, coupled with ambiguity surrounding potential U.S. interest rate reductions, has dampened investor enthusiasm.

Nonetheless, the likelihood of a rate reduction next month has risen following comments from New York Federal Reserve President John Williams, who indicated a cut “in the near term.” The dollar was on track for its most significant weekly increase in six weeks, with the dollar index reaching its peak since late May. The appreciation of the U.S. dollar results in higher oil prices for those holding foreign currencies.