Oil prices dropped by 1.5% on Friday, marking the third straight day of losses. The decline came as the United States pushed for progress on a Russia-Ukraine peace deal, a move that could increase global oil supply. At the same time, uncertainty over future U.S. rate cuts continued to limit investors’ appetite for risk.
Brent crude futures slipped 96 cents, or 1.5%, to $62.42 per barrel by 07:30 GMT. This followed a small drop in the previous session. U.S. West Texas Intermediate also fell sharply, losing 1.8%, or $1.03, to trade at $57.97 after a 0.5% decline on Thursday.
Both benchmarks are on track to fall more than 2.5% for the week. Oversupply worries erased most of the gains seen last week, adding to the bearish tone in the market.
Sentiment weakened further as Washington encouraged a peace framework between Russia and Ukraine to end their three-year conflict. New U.S. sanctions on major Russian oil producers Rosneft and Lukoil were also scheduled to start on Friday, increasing uncertainty.
“Oil extended losses as Zelenskiy agreed to work on a U.S.- and Russia-drafted peace plan, with sanctions against two Russian oil majors set to begin,” Saxo analysts said in a client note.
However, other analysts warned that a deal may not come quickly. ANZ said an agreement remains “far from certain,” noting that Kyiv continues to reject Russia’s demands, making progress difficult. They also questioned whether new restrictions on Rosneft and Lukoil would have a strong impact. Lukoil has until December 13 to sell its large international asset portfolio.
A stronger U.S. dollar added more pressure. With U.S. stocks weakening, the dollar gained, making dollar-priced oil more expensive for buyers using other currencies.
According to OANDA analyst Kelvin Wong, the oil market may face “several headwinds” in the coming weeks. He pointed to a negative feedback loop in U.S. equities after a sharp reversal in the S&P 500.
Rate-cut expectations also shifted. The odds of a December Federal Reserve rate cut dropped to 35%, down from around 90% a month earlier. This reduced the outlook for oil demand. By Friday, the dollar was on track for its strongest week in more than a month, as traders increasingly believe the Fed will not cut rates next month.
