DTN Oil Update
Oil Futures Drop on Russia-Ukraine Deal, Oversupply Fears
SECAUCUS, N.J. (DTN) -- Crude futures settled down almost 2% Tuesday, Nov. 25, as traders see that U.S. efforts to end the Russia-Ukraine could increase the chances of Russian oil trade sanctions being lifted, adding more barrels to global markets.
Traders fear that millions of crude barrels belonging to Russia's Rosneft and Lukoil, now stranded at sea, will be looking for buyers once prohibitions against them are lifted. With OPEC already estimating an oversupply of 500,000 bpd for Q3 2025, the surplus is expected to increase.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Despite the bearish supply situation, the downside in crude futures was limited by growing expectations for a Federal Reserve rate cut in December, following a seven-month low in U.S. consumer confidence reported by the Conference Board.
The NYMEX WTI contract for January delivery settled down $0.89, or 1.5%, at $57.95 bbl after hitting a five-week low of $57.11.
ICE Brent for January delivery dropped $0.97 to $62.40 bbl after falling earlier to $60.97, its lowest since the week ended Oct. 17.
December RBOB gasoline futures closed down $0.0394 at $1.8572, while front-month ULSD futures lost $0.0585 to finish at $2.3476 gallon.
The U.S. Dollar Index softened by 0.407 points to 99.665 against a basket of foreign currencies, alleviating some of the pressure on commodity prices.
Media reports on Tuesday suggested Ukraine had agreed in principle to a 28-point peace plan drawn up by U.S. diplomats, although details on these will have to be agreed by Ukrainian President Volodymyr Zelenskyy with his U.S. counterpart Donald Trump.
Experts believe that Russia needs the war to end too, given the impact of Ukraine drone attacks on its refineries.
"Russia's refining industry just got hit with its lowest run rates in a dozen years -- a direct hit from Ukraine's intensified strikes," Phil Flynn, analyst at Chicago's Price Futures Group, said, estimating a 5-7% loss to Russian GDP with a 40% drop in refining.
"This targeted campaign is delivering more punch than sanctions alone and pushing Putin ever closer to the negotiating table," Flynn said.
