Oil prices declined further on Friday, continuing a three-session losing streak as renewed diplomatic efforts between the United States and Ukraine raised the prospect of increased Russian supply entering the global market.
The development, coupled with weakening sentiment around U.S. monetary policy, deepened bearish positioning across the energy complex.
Brent crude oil, against which Nigerian crude oil is priced, fell 1.5% to $62.42 per barrel as of 08:30 a.m., while the U.S. West Texas Intermediate (WTI) dropped 1.8% to $57.97.
Market participants are assessing geopolitical implications after Washington pushed for a joint Russia-Ukraine peace framework aimed at ending the multi-year conflict.
Analysts warn that a de-escalation could free up additional Russian supply, particularly as sanctions on Rosneft and Lukoil, two of Russia’s largest producers.
“Oil extended declines as Zelenskiy agreed to work on a US- and Russia-drafted peace plan, with U.S. sanctions on two Russian oil majors due Friday,” Saxo analysts said.
However, the market remains doubtful that an agreement can be reached quickly due to Kyiv’s continued rejection of Moscow’s demands.
ANZ analysts noted that “an accord is far from certain,” adding that confidence in sanctions effectiveness is deteriorating as Lukoil retains flexibility until December 13 to offload global assets.
Currency-driven headwinds also weighed on crude pricing. The dollar is on track for its strongest weekly performance in more than a month, making dollar-denominated commodities more expensive for holders of other currencies and curbing near-term import demand.
Investor caution has intensified following a sharp reversal in U.S. equity markets and rising doubts over a Federal Reserve rate cut in December.
The probability of a policy easing has dropped to 35%, according to CME FedWatch data, down significantly from around 90% one month earlier.
“The oil market is likely to face several headwinds in the coming weeks,” said Kelvin Wong, Senior Market Analyst at OANDA, citing risk-off sentiment and weaker stock market performance as contributing factors.
With geopolitical developments, demand projections and currency dynamics all shifting concurrently, crude prices are expected to remain volatile ahead of year-end positioning.
Traders will monitor progress on peace negotiations closely, while assessing the extent of Russian supply adjustments and the Federal Reserve’s next policy decision.