Oil prices declined on Thursday amid expectations of a potential ceasefire between Ukraine and Russia, which could facilitate the easing of Western sanctions on Russian supply. However, trading activity was anticipated to remain subdued due to the U.S. Thanksgiving holiday. Brent crude futures declined by 21 cents, or 0.3%, settling at $62.92 per barrel as of 0108, whereas U.S. West Texas Intermediate crude futures fell by 21 cents, or 0.4%, to $58.44 per barrel. Both contracts concluded approximately 1% higher on Wednesday as investors evaluated the risks associated with oversupply and the potential for a peace agreement between Russia and Ukraine. U.S. envoy Steve Witkoff is scheduled to visit Moscow next week alongside other senior U.S. officials to engage in discussions with Russian leaders regarding a potential strategy to conclude the nearly four-year conflict in Ukraine, which has become the most lethal in Europe since World War Two.

Nonetheless, Russia is unlikely to offer significant concessions regarding a peace plan, as stated by a senior Russian diplomat on Wednesday. This statement follows the emergence of a leaked recording of a call featuring Witkoff, in which he appeared to counsel Moscow on strategies to appeal to U.S. President Donald Trump. According to analyst Vivek Dhar, “Any ceasefire will reduce perceived supply risks tied to U.S. sanctions on Russian oil producers Rosneft and Lukoil,” noting that the sanctions, which took effect on Nov. 21, have already impacted Russia’s oil and refined product exports. “A Ukraine-Russia deal should see Brent fall to $60 a barrel relatively quickly,” Dhar stated, highlighting that a ceasefire would also enable Russian refinery activity to normalise as Ukraine’s drone attacks would cease. A larger-than-anticipated increase in U.S. crude inventories also exerted downward pressure on the market. U.S. crude inventories increased by 2.8 million barrels, reaching a total of 426.9 million barrels last week, as imports surged to an 11-week high, according to the Energy Information Administration’s report on Wednesday. Analysts had anticipated an increase of 55,000 barrels.

U.S. energy firms reduced the count of oil rigs by 12 to reach 407 this week, marking the lowest level since September 2021, according to energy services firm Baker Hughes on Wednesday. This development indicates that the market remains well-supplied. According to the sources, the Organization of the Petroleum Exporting Countries and its allies are expected to maintain current output levels during their meeting on Sunday.

A portion of the collective, responsible for approximately fifty percent of global oil output, has been increasing production levels since April in an effort to capture greater market share. Crude prices received some support from increasing expectations regarding a potential interest rate cut by the U.S. Federal Reserve in December. A reduction in interest rates generally serves to invigorate economic expansion and enhance the demand for oil.1