US West Texas Intermediate (WTI) crude oil was trading around $57.70 at the time of writing on Thursday, down 1.80% on the day. Crude oil remained under pressure as signs of progress emerged in negotiations aimed at ending the conflict between Russia and Ukraine, a development that reduced the risk premium previously embedded in oil prices.

US President Donald Trump reportedly told Ukrainian President Volodymyr Zelensky that he had until Christmas to accept a proposal that could end the war, according to the Telegraph. Meanwhile, Zelensky confirmed that he was finalizing a revised peace plan to submit to Washington, signaling an acceleration in diplomatic efforts. Analysts noted that continued de-escalation would reduce risks to regional energy infrastructure and improve supply visibility, prompting a bearish adjustment in WTI in the short term.

On the macroeconomic front, the Federal Reserve (Fed) cut interest rates again by 25 basis points on Wednesday, lowering the federal funds rate range to 3.5%-3.75%. A more accommodative policy stance could support energy demand by stimulating economic activity, although its immediate impact remains limited in a market currently dominated by supply-side considerations.

Data from the Energy Information Administration (EIA) released on Wednesday showed that US crude oil inventories fell by 1.812 million barrels for the week of December 5, exceeding expectations for a decrease of around 1.2 million barrels. While this larger-than-expected decline would normally support prices, it was overshadowed by geopolitical developments in Eastern Europe.

Meanwhile, analysts at ING highlighted that the global oil market continues to slide deeper into oversupply as Russian export volumes struggle to find buyers. The bank emphasized that a deeper discount on Russian crude or even a potential reduction in Russian production may be needed to rebalance the market.

For now, investors' focus remains on developments in negotiations between Kyiv, Moscow, and Washington, which are the main drivers of WTI movement. Any confirmation of progress, or conversely, signs of deterioration, could trigger increased energy price volatility. (alg)

Source: FXstreet