Oil fell over 2% as prospects of Russia–Ukraine peace dilute risk premium

Oil prices fell sharply on Wednesday as Oil prices fell sharply on Wednesday as renewed Russia–Ukraine diplomacy erased much of the recent geopolitical premium, overshadowing a larger-than-expected US crude draw.

Brent crude settled $1.38 lower, or 2.1%, at $63.51 a barrel.

WTI declined by $1.30, also 2.1%, to close at $59.44 a barrel.

Reports that Washington has drafted a framework for a negotiated settlement and urged Kyiv to consider territorial concessions prompted traders to reassess the supply outlook. A formal easing of tensions could pave the way for additional Russian exports, reinforcing existing oversupply concerns and weighing on futures.

Analysts said the return of sanctioned barrels — much of it currently in floating storage — could push benchmarks into the low $50s if diplomacy progresses. The shift comes ahead of the 21 November deadline for US sanctions on Rosneft and Lukoil, which have squeezed Russia’s revenues but may prove less restrictive if a peace deal gains traction.

Market focus also returned to fundamentals after weeks of headline-driven trading. While EIA data showed US crude inventories falling by 3.4 million barrels, the draw was smaller than expected. Gasoline and distillate stocks rose for the first time in a month as higher refinery runs met softer demand, sending heating oil futures sharply lower.

The broader outlook remains fragile, with expectations that global supply will outpace demand in 2026 amid growing non-OPEC+ output. Until clearer progress is seen on diplomatic talks and sanctions, prices are likely to remain rangebound as traders balance easing geopolitical risk against a deteriorating market balance.

Written by: Aiman Haikal