Oil prices fell below $60 a barrel on Tuesday, the lowest since May, as prospects for a Russia-Ukraine peace deal appeared to strengthen, raising expectations sanctions could be eased.

Brent crude futures fell $1.03, or around 1.7%, to $59.53 a barrel at 1340 GMT, while U.S. West Texas Intermediate crude was trading at $55.76, down $1.06, or 1.9%.

"Brent has dropped this morning to below $60 per barrel for the first time in months, as the market assesses a potential peace deal resulting in additional Russian volumes becoming available and oversupplying the market further," said Rystad analyst Janiv Shah.

The U.S. offered to provide NATO-style security guarantees for Kyiv and European negotiators reported progress in talks on Monday, sparking optimism that an end to the war was closer.

Russia, meanwhile, said it was not willing to make any territorial concessions, state news agency TASS quoted Deputy Foreign Minister Sergei Ryabkov as saying.

"The grind in talks will be matched with the continued grind lower in prices as we enter 2026 with all its associated predictions of 'glut.' Brent will make a fresh year-to-date low, but will not break below $55 a barrel before the year is out," said PVM Oil Associates analyst John Evans.

The six-month Brent futures spread moved into a contango for the first time since October.

Barclays analysts expect Brent to average $65/bbl in 2026, slightly ahead of the forward curve, due to the expected 1.9 million bpd surplus they see as being priced in already.

Source: Investing.com