Oil falls $1 on looming supply glut, hopes of Ukraine peace deal

Oil prices fell by more than $1 a barrel on Friday as investors weighed a looming global supply glut, while also keeping an eye on ‍a potential Ukraine peace deal ‌ahead of talks this weekend between Ukrainian President Volodymyr Zelensky and US President Donald ⁠Trump.

Brent crude futures fell $1.13 or 1.82% ‍to $61.11 per barrel by 1:14 pm EDT. US West Texas Intermediate (WTI) crude fell $1.13 or 1.94% to $57.22.

Global oil supply next year to exceed demand by 3.84 million barrels per day

While supply disruptions have helped oil prices rebound in recent sessions from their near five-year low on December 16, they are on track for their steepest annual decline since 2020. Brent ‍and WTI are down 18% and 20% respectively on the year, as rising crude output caused concerns of an oil ‍glut heading into next year.

"Geopolitical premiums have provided near-term price support, but have not materially shifted the underlying oversupply narrative," Aegis Hedging analysts said in a note on Friday.

The global oil supply next year will exceed demand by 3.84 million barrels per day, according to figures from the Paris-based IEA's December oil market report.

Investors are watching for developments in the Russia-Ukraine peace process and the possible impact on future oil prices, as a peace agreement could lead to the removal of ‌international sanctions against Russia's oil sector.

Zelensky will discuss territorial issues, the main stumbling block in talks to end ‍the war, with Trump in Florida on Sunday, as a 20-point peace framework and a security guarantees deal near completion.

Announcing the meeting, Zelensky said that "a lot can be decided before the New Year."

The Ukrainian president also told Axios he would be willing to bring ​an agreed peace framework with Trump to a

referendum if Russia agrees to a ceasefire.

A foreign policy aide to Russian President Vladimir Putin spoke to members of the US administration after Moscow received US proposals about a possible Ukrainian peace deal, the Kremlin said on Friday.

"The negatives remain ​of elevated ‍global oil storage, and slight progress on Ukraine-Russia peace talks," said Dennis Kissler, senior vice president of trading at BOK ‌Financial.

Quarantine on Venezuelan oil for 2 months

Elsewhere, the White House ordered its military forces to focus on a "quarantine" of Venezuelan oil for at least the next two months, indicating Washington is currently more interested in using economic rather than military means to pressure Caracas.

"The global impact to crude prices looks minimal ​at this time," Kissler said ‌of US actions to intercept sanctioned oil tankers leaving and entering Venezuela.

Despite headline risk pertaining to Venezuela, the broader market remains focused on the growing global surplus, according to Aegis Hedging analysts.

The US on Thursday also carried out a strike against Daesh militants in northwest Nigeria's Sokoto state in coordination with the Nigerian government, Trump said.

"Nigerian strikes touted by Trump are ‌targeting Daesh and not specifically impacting any crude pipelines or oil terminals. Thus traders are staying on the sidelines in this thin-liquidity market on Boxing Day," said June Goh, senior oil market analyst at Sparta Commodities.

Nigeria's oilfields and export infrastructure are mainly located in the south of the country.

Reuters