Oil fell as signs of progress in peace talks between Ukraine and Russia buoyed expectations that Moscow's supply will stay online. 

West Texas Intermediate futures fell 1.5% to settle near $58 a barrel, the lowest in a month, as talks to end the war in Ukraine show signs of progress. Crude had dropped sharply earlier in the session after ABC News reported Kyiv agreed to the terms of a revised peace deal aimed at ending Russia's nearly four-year war.

Ukraine's President Volodymyr Zelenskiy said talks on a peace plan are continuing with the US. There are key points still to be resolved between US and Ukraine, including the thorniest issues, according to a person familiar with the matter. A White House spokesperson signaled optimism around the efforts while warning some details still need to be sorted as Russia's position on the plan remains unclear. Moscow and Ukraine carried out airstrikes overnight.

"Flat crude prices got hammered on news that Ukraine appeared open to the broad contours of the US-proposed peace plan," said Rory Johnston of Commodity Context. The physical market tells a different story, with "prompt Brent timespreads continuing to strengthen, indicating continued tightness" in near-term supply.

An end to the war would have significant ramifications for the oil market. Russia is one of the world's top producers and its flows are heavily sanctioned by the US, European Union and UK. In October the US announced new sanctions on its two major producers. It's still far from certain, though, that Russia will accept a revised peace plan that cut several points from an initial proposal following input from European officials.

"For energy markets, this means volatility is far from over," said Jorge Leon, head of geopolitical analysis at Rystad Energy A/S. "Prices reacted swiftly to the initial optimism for an agreement, but the underlying uncertainty has not changed. With several core issues unresolved and fighting still ongoing in parts of Ukraine, any new information from Kyiv or Moscow can move markets sharply in either direction."

In post-settlement trading, US President Donald Trump said on X that he looks forward to meeting Zelenskiy and Russian President Vladimir Putin, "but only when the deal to end this war is final."

Any uptick in Russian oil volumes would only add to the oversupply in a market that the International Energy Agency says is heading for a record annual surplus next year. Producers inside and outside the Organization of the Petroleum Exporting Countries and its allies have been ramping up output in recent months, boosting supplies at a faster pace than demand is growing. Oil prices are down this year and on course for a fourth monthly decline. 

WTI for January delivery dropped 1.5% to settle at $57.95 in New York.

Brent for January settlement fell 1.4% to settle at $62.48 a barrel.

Source : Bloomberg.com