Oil Prices Drop Over 2% as Supply Glut Fears Persist Amid Ukraine Peace Talks

Oil prices fell more than 2% on Friday as investors weighed the prospect of a growing global supply glut while monitoring diplomatic developments ahead of peace talks between Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump. Brent crude settled down $1.60, or 2.57%, at $60.64 per barrel, while U.S. West Texas Intermediate (WTI) crude declined $1.61, or 2.76%, to $56.74. Despite recent price support from geopolitical tensions and supply disruptions, both benchmarks remain on track for their steepest annual losses since 2020 amid surging crude output.

Analysts warned that oversupply remains the dominant market narrative, with the International Energy Agency projecting global oil supply to exceed demand by 3.84 million barrels per day next year. “Geopolitical premiums have provided near-term price support, but have not materially shifted the underlying oversupply narrative,” Aegis Hedging said. Elevated storage levels and expectations of continued production growth have reinforced concerns that the oil market may face deeper surplus conditions heading into the new year.

Investors are also keeping a close watch on progress in Russia-Ukraine peace efforts, which could eventually pave the way for sanctions relief on Russia’s oil sector. Zelenskiy is set to meet Trump in Florida on Sunday as a 20-point peace framework nears completion, while Moscow has confirmed receiving U.S. proposals through diplomatic channels. Meanwhile, U.S. actions to tighten restrictions on Venezuelan oil shipments are seen as having limited impact on global crude prices, with traders remaining primarily focused on the widening supply overhang.

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