Oil prices continued their decline on Monday as investors balanced the possibility of a US interest rate cut against emerging hopes for a Ukraine peace agreement that could ease sanctions on major Russian oil producers.
Brent crude fell 58 cents, or 0.9 percent, to $61.98 per barrel, while West Texas Intermediate (WTI) slid 60 cents, or 1 percent, to $57.46 a barrel by mid morning trading.
Market participants said the global energy landscape remains heavily influenced by geopolitical developments and US monetary policy, creating uncertainty for investors.
The United States and Ukraine are set to resume discussions on a revised peace plan ahead of a Thursday deadline set by US President Donald Trump.
The updated plan follows earlier criticism that initial proposals were too favorable to Moscow. Officials have indicated that the deadline may be flexible, with U.S Secretary of State Marco Rubio noting Sunday that it “might not be set in stone.”
The potential peace deal has broad implications for the oil market. Russia, the world’s second largest crude producer after the United States, has faced sanctions targeting state owned Rosneft and private firm Lukoil.
These sanctions, which took effect last Friday, have typically pushed oil prices higher, but the prospect of eased restrictions has created a bearish sentiment.
“The market is overwhelmingly focused on the macro view, which is this Ukraine peace treaty and the US economy,” said Jorge Montepeque, managing director at Onyx Capital Group.
He added that investors are temporarily ignoring the impact of sanctions on Russian oil, viewing the potential peace deal as a factor that could normalize exports and stabilize supply.
US monetary policy is another key driver. Investors are closely watching signals from the Federal Reserve regarding potential interest rate adjustments.
New York Fed President John Williams recently suggested that a near term rate cut is possible, fueling speculation that December could bring easing measures.
“Expectations of a potential Fed rate cut in December may provide a counterbalance to bearish sentiment by improving global risk appetite,” said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi based research firm.
Oil markets are sensitive to both geopolitical and macroeconomic signals, and right now both factors are in flux.
Oil prices have declined approximately 3 percent over the past week, extending losses that began after a combination of tightening US monetary policy and geopolitical uncertainty weighed on investor sentiment.
Brent crude has dropped from near $64 per barrel, while WTI has slid from roughly $59 per barrel in early trading last week.
According to the US Energy Information Administration, Russia produced an estimated 11.2 million barrels per day of crude in 2024, making it a key player in the global energy market alongside the United States, which produced 12.1 million barrels per day.
Any relaxation of sanctions could restore Russian supply levels, potentially moderating global oil prices further.
Local energy traders in Houston and London said the current climate reflects both caution and anticipation. “We are seeing clients hesitant to take large positions,” said Mark Delaney, a senior oil broker in Houston. “The peace talks are a wild card, and any hint of a deal could reverse sentiment quickly.”
In Kyiv, Ukrainian officials expressed optimism but remained measured. “We are working on a revised plan that reflects our national interests while maintaining pressure on Russia,” said Andriy Shevchenko, a Ukrainian diplomatic adviser.
“Our goal is stability, and we hope that will translate into more predictable energy markets.” Meanwhile, Russian energy analysts noted that the impact of sanctions has been uneven.
“While state owned companies have faced constraints, private producers like Lukoil have adapted to maintain output,” said Elena Kozlova, a Moscow based energy consultant. “Any easing of sanctions would likely improve export flow and could influence global benchmarks.”
Market watchers say oil prices will remain sensitive to a combination of geopolitical developments and US economic policy in the coming days.
The deadline for a revised peace agreement and signals from the Federal Reserve on potential rate cuts will be key triggers for market movement.
“The next week could see volatility,” said Montepeque. “Even small announcements from Washington or Kyiv can ripple through global oil markets.”
Analysts suggest that prices could rebound if negotiations falter or if additional sanctions on Russian energy are imposed, but easing measures could exert further downward pressure.
Oil markets entered the week on a cautious note, reflecting a balance of geopolitical optimism and macroeconomic uncertainty.
Investors are monitoring the Ukraine peace talks and Federal Reserve signals closely, with both factors likely to influence price direction in the near term.
As the situation unfolds, traders and policymakers alike are preparing for potential volatility, underscoring the interconnected nature of energy markets, global diplomacy, and monetary policy.
