Oil prices retreat with focus on potential Russia-Ukraine peace deal

Investing.com-- Oil prices fell Tuesday, pressured by the prospect of a U.S.-brokered peace deal between Russia and Ukraine, although losses were limited as strict U.S. sanctions against Moscow’s biggest oil firms took effect.

At 04:45 ET (09:45 GMT), Brent oil futures for January fell 0.7% to $62.27 a barrel and West Texas Intermediate crude futures fell 0.9% to $58.42 a barrel. 

US, Ukraine seen working together on Russia peace deal

U.S. and Ukrainian officials were seen working together to draft a comprehensive plan to end the war with Russia, reports showed on Monday. The two also announced a reworked plan after peace talks in Geneva on Sunday, although few details on the matter were shared. 

Washington had earlier this month revealed a 28-point plan aimed at ending the war, although the proposal was criticized for leaning heavily towards Russian interests. 

Still, the prospect of an end to the long-running Russia-Ukraine war weighed on oil markets, given that such a scenario could greatly free up Russia’s oil shipments, boosting supply.

Any further increases in supply will add to already well-stocked markets, and could result in a bigger-than-anticipated supply glut in the coming year. 

"Reports suggest that there have been significant changes to the proposed peace plan, with the U.S. and Ukraine essentially drafting a new one," said analystst at ING, in a note. "The more contentious points, such as those related to territory, will need to be ironed out by President Trump and President Zelensky. Obviously, Russia must agree on any deal. For oil markets, a deal could remove significant supply risk, leaving participants to focus on bearish supply fundamentals through 2026."  

U.S.-Russia sanction impact in focus 

U.S. sanctions on Russia’s largest oil firms, Rosneft and Lukoil, took effect last week.

Markets are now watching to see whether the restrictions – which are among the strictest U.S. sanctions against Russia to date – will meaningfully disrupt global oil supplies. 

The sanctions cut off several export pathways for Russia’s oil industry, and will make it more difficult for major buyers to source crude from the country. 

News of the sanctions had earlier lifted oil prices, although gains were short-lived amid broader concerns over oversupply.

Deutsche Bank sees a 2026 crude oil surplus of at least 2 million barrels per day and no clear path back to deficits even by 2027, the bank said in a note on Monday.

"The path forward into 2026 remains a bearish one," Deutsche Bank said.

Ambar Warrick contributed to this article