Oil prices eased on Thursday as early optimism around a potential ceasefire between Russia and Ukraine prompted traders to reassess the risk premium attached to the nearly four-year-long conflict.
With the US Thanksgiving holiday thinning liquidity across global markets, crude benchmarks moved in narrow ranges but retained a cautious tone.
Brent crude futures dipped by 12 cents, or 0.2 per cent, to $63.01 a barrel near 1 PM. US West Texas Intermediate (WTI) slipped 5 cents, or 0.1 per cent, to $58.6 a barrel, reported Reuters.
Both contracts had settled roughly 1 per cent higher in the previous session, as markets balanced oversupply concerns with reports of renewed diplomatic engagement.
A US delegation led by envoy Steve Witkoff is scheduled to travel to Moscow next week for discussions with Russian officials on a possible settlement to the war, Europe’s deadliest since World War Two. While the news has injected a sense of cautious optimism, Russian officials have signalled they are unlikely to make sweeping concessions.
A senior diplomat reiterated this stance on Wednesday, following the leak of a call in which Witkoff was heard advising Moscow on how to frame its proposal to US President Donald Trump.
Risk Premium Begins to Unwind
“Oil is inching lower this morning largely on hopes of a Ukraine peace breakthrough and a broader unwinding of the war-premium, but the market still feels thin and directionless ahead of the OPEC+ meeting and the US Thanksgiving lull,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
The possibility of sanctions being eased, or even lifted, should a ceasefire materialise has sharpened focus on Russian supply. Traders say any significant progress could unleash additional barrels into a market already grappling with oversupply.
“The real story is that prices remain extremely vulnerable and any serious progress on peace talks would unleash more freely flowing Russian barrels into an already-oversupplied market, keeping crude skewed to medium-term downside with only short-lived spikes,” Sachdeva added.
OPEC+ Meeting Looms Amid Market Imbalance
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) are likely to keep production targets unchanged at their upcoming meeting on Sunday, according to three group sources.
Analysts suggest that with inventories rising and demand growth uneven, OPEC+ has limited appetite for deeper cuts. However, policymakers remain wary of adding volatility to a market already sensitive to geopolitical shifts.
Fed Rate Cut Expectations Offer a Cushion
Providing some support to crude prices are growing expectations of a US Federal Reserve interest rate cut in December. A lower rate typically boosts economic activity and energy consumption.
“We are now approaching the year-end with thinner liquidity without any new drivers unless the Fed surprises the markets with a hawkish guidance on the 10 December FOMC meeting,” said Kelvin Wong, senior market analyst at OANDA.
Wong expects WTI crude to remain largely range-bound in the near term. “WTI crude is likely to be range-bound between US$56.80 and US$60.40 till year-end,” he noted.
