The two major crude oil grades fell on Wednesday after reports indicated the United States is renewing its push to end Russia’s war in Ukraine and has drafted a framework for it.
Brent crude futures went down by $1.63 or 2.5 per cent to $63.26 a barrel and the US West Texas Intermediate (WTI) crude futures were down by $1.56 or 2.6 per cent to $59.18 per barrel.
Reuters reported that the US has signalled to President Volodymyr Zelenskiy that Ukraine must accept a US-drafted framework to end the war with Russia that proposes Ukraine giving up territory and some weapons.
Analysts said an end to the war in Ukraine might pave the way for higher Russian oil flows, adding to oversupply concerns.
The US last month announced sanctions against Russian oil majors Rosneft and Lukoil, setting a November 21 deadline for companies to wind down business with the companies.
The sanctions had already reduced oil revenues for Russia and are likely to reduce the amount of oil it can sell in the long-term, the US Treasury said on Monday.
Meanwhile, Russia’s Deputy Prime Minister Alexander Novak denied that the sanctions were impacting oil production, and said Russia will reach its production quota under the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) by the end of this year or early next year.
Russia’s Deputy Prime Minister Alexander Novak denied that the sanctions were impacting oil production, and said Russia will reach its OPEC+ production quota by the end of this year or early next year.
The development also translates to a lower geopolitical risk premium which would leave investors focusing more closely on weak market fundamentals.
Crude oil inventories in the US decreased by 3.4 million barrels during the week ending November 14, after gaining 6.4 million barrels in the week prior, according to new data from the US Energy Information Administration (EIA) released on Wednesday. The EIA’s data release follows figures the American Petroleum Institute (API) that were released a day earlier, which suggested that crude oil inventories grew by 4.4 million barrels.