DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Oil futures hit fresh two-month lows Monday as reports of progress in Ukrainian peace talks heightened concerns about the potential removal of sanctions from Russian oil that would add to the global crude glut.

Ukrainian President Volodymyr Zelenskyy described as "very constructive" talks he had for over seven hours since Sunday with a U.S. delegation trying to end the near four-year conflict between his country and Russia. The U.S. team, led by special envoy Steve Witkoff and President Donald Trump's son-in-law Jared Kushner, reported the talks were "positive in almost every respect".

Responding to the reports, the NYMEX WTI futures contract for January delivery settled down $0.62 at $56.82 barrel (bbl), after hitting a two-month low at $56.40.

"The bottom line is gravity is winning," Phil Davis, an oil trader at PSW Investments in Paterson, New Jersey, said, referring to WTI's near-term direction. "We have immediate risk down to $55. If that breaks, the technicals point us straight to $53.50 and likely the $48 to $50 zone by early next year, unless we see a decisive break over $60."

Any progress or retreat in the Ukraine talks are crucial to traders trying to figure out the odds for a peace pact that would end U.S. and European sanctions on Russian oil -- and weigh further on crude prices that include Brent oil.

ICE Brent for February shipment settled down $0.56 bbl at $60.56, registering a two-month bottom of $60.13 earlier in the session.

The downward pressure on crude prices also hit fuel futures. RBOB futures contract for January delivery slipped $0.0228 to $1.7293 gallon. ULSD futures for delivery in January dipped $0.0200 to $2.1780 gallon.

Millions of Russian crude barrels are trapped at sea now due to the sanctions and are poised to become legitimate cargo if shipping restrictions on them are lifted.

In Monday's negotiations, Zelenskyy discussed his willingness to compromise on Ukraine's long-standing aspiration for NATO membership, media reports said.

But Kyiv also pushed back on U.S. suggestions that it withdraw from Ukraine's Donbas territory, which is prized by both the warring sides, the reports added. Zelenskyy said previously that ceding Donbas can only happen with a vote by all Ukrainians.

Also weighing on oil Monday was a claim by Venezuelan state oil company PDVSA that its production had not been affected by a cyber-attack it accused the U.S. and domestic conspirators of.

Along with Russian oil, energy markets have been scrutinizing Venezuelan crude exports since a tanker bearing oil from that country was seized by U.S. forces last week. The tanker seizure came amid a massive pressure campaign against the regime of Venezuelan President Nicolas Maduro by the Trump administration which supports the Latin American country's democratic opposition leader Maria Corina Machado.