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Oil prices experienced a decline on Wednesday following Russia’s agreement to US President Donald Trump’s proposal for a temporary halt in hostilities between Moscow and Kyiv regarding their energy infrastructure. This development could potentially facilitate the re-entry of Russian oil into global markets.
As of 0924 GMT, Brent crude futures had decreased by 59 cents, or 0.84 percent, settling at $69.97 per barrel. Meanwhile, US West Texas Intermediate crude (WTI) fell by 60 cents, or 0.90 percent, to $66.30.
On Tuesday, Russian President Vladimir Putin consented to cease attacks on Ukrainian energy facilities; however, he did not fully endorse the comprehensive 30-day ceasefire that Trump had advocated. Analyst Ashley Kelty from Panmure Liberum noted, “Crude prices have softened due to indications of progress towards a ceasefire agreement in Ukraine, alongside broader market weaknesses as traders and investors express concerns over the repercussions of tariff conflicts.” He added, “Even if an agreement is reached, it may take time before Russian energy exports significantly increase, with the immediate effect likely being a redirection of flows to secure better pricing.”
Russia ranks among the leading oil suppliers globally, but its production has diminished since the onset of the war, which has led to sanctions on its energy sector.
Analysts suggest that a potential ceasefire could result in a relaxation of sanctions, thereby increasing oil supply and potentially lowering prices.
Concerns about a potential recession have intensified due to US tariffs imposed on Canada, Mexico, and China, which have also negatively impacted oil prices by reducing demand for crude oil.
According to analysts at Goldman Sachs, oil markets continue to be influenced by the potential for price declines, even in the face of escalating tensions in the Middle East.
The analysts noted, “The escalation of tariffs and the presence of high spare capacity shift the medium-term risks associated with our forecast towards the downside.”
Traders are also closely monitoring the results of the US Federal Reserve’s policy meeting, which is set to conclude later today.
Typically, interest rate reductions stimulate economic growth and increase energy demand. However, the Fed is anticipated to maintain its benchmark interest rate within the range of 4.25 percent to 4.50 percent, amid concerns from investors regarding an economic slowdown linked to Trump’s tariffs.
Trump has pledged to persist in his military actions against Yemen’s Houthis and has stated that Iran will be held accountable for any attacks by the group that disrupt shipping in the Red Sea.
In Gaza, Israeli airstrikes have reportedly resulted in the deaths of at least 200 individuals, according to Palestinian health authorities, marking the end of a week-long ceasefire and heightening the risk of oil supply disruptions in the wider region.
In the United States, data on crude oil stocks presented a mixed scenario, showing an increase in crude inventories while fuel stocks experienced a decline.
