WTI crude oil prices continue to drift lower and are currently trading around $56.35 during the Asian session. The dominant factor behind this drop is increasing hope for a peace deal between Russia and Ukraine. When markets believe a protracted war might conclude, oil prices tend to drop. That’s because peace means less fear that supplies will be cut off, and traders think that more oil may flow into the world market.
ANY POTENTIAL RUSSIA-UKRAINE PEACE DEAL COULD BOOST OIL SUPPLY
US officials said Monday that a deal to halt the war with Russia is within reach, but there are still key details to work out, including the territorial lines and long-term security assurances from the US and European nations. A successful peace agreement, in turn, may eventually translate into fewer restrictions on Russian oil exports, adding to supply globally and bearishness in the prices of oil.
Adding to the cautious mood, traders are awaiting weekly U.S. crude inventory data that could shed more light on supply and demand trends. Anticipations of growing supplies have already spurred selling in the oil market and are keeping prices under pressure.
What Is Limiting the Fall in Prices
Even though prices are under pressure, the downside is not completely open. Concerns about US action against Venezuela are helping to support oil prices. Recent US measures have disrupted Venezuela’s oil exports, reducing supply from that region. With fewer barrels coming from Venezuela, oil prices may avoid a sharper fall.
In simple terms, oil is moving lower because the world may see more supply if peace talks succeed. However, supply issues in other regions are stopping prices from falling too fast.
