Oil slips amid Ukraine peace talks, Fed rate watch

Oil markets fell modestly on Tuesday as investors balanced a possible thaw in the Russia Ukraine conflict with a Federal Reserve decision that could reshape demand into next year. Brent crude traded around 62.41 dollars a barrel and U.S. West Texas Intermediate near 58.75 dollars, extending losses from the previous session when contracts dropped by more than one dollar after Iraq restored output at Lukoil’s West Qurna 2 oilfield.

The combination of renewed production from Iraq and signs of easing geopolitical risk pressured prices that have been trading in a wide band through 2025. Traders and analysts said attention has shifted from acute supply shocks toward the interplay of ample global inventories and subdued demand expectations for 2026. Market participants are also focused on a revised Ukrainian peace plan that was shared with U.S. officials following talks in London, a development that could alter expectations about Russian barrels returning to world markets if substantive progress is made.

Complicating that prospect, officials from the Group of Seven and the European Union are reported to be discussing tighter measures on Russian oil exports, including restrictions on maritime services. Such steps could raise logistical costs and create patchwork frictions that reduce flows from sanctioned sellers, even as production onshore and in other exporting nations remains elevated. The tension between potential political openings and new policy constraints on Russian crude is keeping traders cautious.

The other major influence is U.S. monetary policy. Markets are pricing in a likely quarter point Fed rate cut, a move that typically supports oil demand by easing borrowing costs and weakening the dollar. Lower global interest rates can stimulate economic activity and transport fuel consumption, which in turn supports crude prices. Yet analysts cautioned that persistent oversupply could blunt any rally prompted by monetary easing, since excess barrels in storage reduce the need for immediate imports and cap near term price gains.

For energy producers the present mix of forces points to continued volatility. Producers outside Russia have incentives to defend market share, and any tightening measures aimed at Russian exports may prompt compensating production decisions elsewhere. For refiners and consumers, modestly lower spot prices provide limited relief at the pump, but the prospect of policy induced shifts in supply chains means retail prices could swing again if sanctions regimes or Fed policy take unexpected turns.

Looking beyond the immediate session, the market faces a delicate balancing act. Demand projections into 2026 remain cautious amid structural changes in transport efficiency and the growth of alternative energy, even as near term geopolitical events could intermittently amplify price movements. With Brent around 62 dollars and WTI under 59 dollars, the coming days will hinge on whether the London talks yield concrete progress and how the Fed frames future policy around growth and inflation.