Oil prices declined on Tuesday, extending losses from the previous session as optimism over a potential Russia-Ukraine peace agreement increased expectations that sanctions on Russian energy exports could eventually be eased.
Brent crude futures slipped 35 cents, or 0.6%, to $60.21 a barrel in early trading, while U.S. West Texas Intermediate crude fell by the same margin to $56.47 a barrel.
Analysts said the oil market is increasingly factoring in signs of progress toward a diplomatic resolution between Russia and Ukraine. Such developments have raised concerns that recent U.S. sanctions on Russian oil producers could be rolled back, adding supply to an already well-stocked global market.
Peace talks and China data pressure oil demand outlook
Optimism around the conflict grew after the United States offered NATO-style security guarantees for Kyiv, while European officials reported progress in peace discussions on Monday. Although negotiations appear to be advancing, major issues such as territorial concessions remain unresolved.
Oil prices were further weighed down by weak economic data from China, which renewed fears that global demand may struggle to keep pace with rising supply. Official figures showed that China’s factory output growth slowed to its weakest pace in 15 months, while retail sales expanded at their slowest rate since late 2022.
The data suggested that China’s reliance on exports to offset sluggish domestic demand may be losing momentum. A softer economic outlook in the world’s largest oil importer could further dampen crude demand, especially as electric vehicle adoption continues to reduce fuel consumption.
Supply concerns offset by market conditions
These demand-side pressures outweighed concerns over supply disruptions after the United States seized an oil tanker off the coast of Venezuela last week.
Market participants noted that high levels of floating storage and increased Chinese purchases of Venezuelan crude ahead of potential sanctions have limited the overall impact of the seizure on oil prices.
