Oil prices slipped below $60 a barrel on Tuesday, marking their lowest level since May, as growing optimism around a potential Russia-Ukraine peace deal raised expectations that sanctions on Russian supply could eventually be eased.
Oil drops as peace talk optimism weighs on prices
Brent crude futures declined $1.03, or about 1.7%, to $59.53 a barrel by mid-day trading, while U.S. West Texas Intermediate fell $1.06, or 1.9%, to $55.76. The move reflects rising concerns that additional Russian oil could return to global markets if diplomatic progress continues.
Market analysts noted that Brent’s fall below $60 signals investor anxiety over a possible increase in supply. The prospect of peace has led traders to price in the risk of oversupply, particularly if sanctions are relaxed.
Russia-Ukraine talks fuel supply concerns
Optimism grew after reports that European negotiators made progress in talks and the United States signaled willingness to offer NATO-style security guarantees to Ukraine. These developments increased speculation that an end to the conflict could be approaching.
However, Russia indicated it remains unwilling to make territorial concessions, highlighting that negotiations could remain lengthy. Analysts warned that oil prices may continue to drift lower as markets focus on the potential return of Russian barrels and the risk of a global supply glut heading into 2026.
The six-month Brent futures spread moved into contango for the first time since October, a structure often associated with oversupply conditions.
Weak China data adds to demand worries
Additional pressure came from disappointing economic data out of China, raising doubts about global demand growth. Official figures showed China’s factory output expanding at its slowest pace in 15 months, while retail sales growth weakened to its lowest level since late 2022.
Analysts said the slowdown in Chinese activity is reinforcing fears that demand may not be strong enough to absorb recent increases in supply, further weighing on oil prices.
Oversupply fears remain dominant
Some downside risks were partially offset by the United States seizing an oil tanker off Venezuela last week. However, traders noted that rising floating storage levels and increased Chinese purchases of Venezuelan crude ahead of potential sanctions have limited the market impact.
Looking ahead, major banks expect prices to remain under pressure. Barclays forecasts Brent crude to average around $65 a barrel in 2026, noting that a significant supply surplus is already reflected in current market pricing.
