Oil prices slipped 2 per cent on Monday after Iraq restored production at one of its oilfields while investors weighed ongoing talks to end the war in Ukraine.
Brent crude futures were down $1.26 or 1.98 per cent to $62.49 a barrel, and the US West Texas Intermediate (WTI) crude was down by $1.20 or 2 per cent to close at $58.88 per barrel.
Iraq restored production at Lukoil’s West Qurna 2 oilfield, one of the world’s largest, after a leak on an export pipeline slashed its output.
West Qurna-2 is one of the world’s largest oilfields, producing roughly 460,000 barrels per day and holding an estimated 13 billion barrels of recoverable reserves—about 10 per cent of Iraq’s total output. Lukoil operates the field with a 75 per cent stake, while the Iraqi government owns the remainder. The temporary outage raised concerns due to the field’s strategic importance, but officials now say the issue has been resolved and flows are returning to normal.
The oilfield has been under force majeure since November after sanctions by the US and UK disrupted operations.
Markets are meanwhile pricing in an 84 per cent chance of a quarter-point cut at the Fed meeting on Tuesday and Wednesday.
Progress on Ukraine peace talks remains slow, with disputes over security guarantees for Ukraine and the status of Russian-occupied territory still unresolved even as US President Donald Trump presses for a deal.
Some of the critical amendments in the new plan include no handover of the Donbas region to Russia for free, no automatic veto on Ukraine joining NATO in the future and provision of Article 5-style protection for Ukraine, meaning the US would be bound to intervene if Russia invades in the future.
Market analysts warned that any geopolitical risk premium will be weighed against signs of a growing global surplus, with rising Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and non-OPEC supply outpacing modest demand growth.
Also, Group of Seven (G7) countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban. This would likely further curb supply from the world’s second-largest oil producer.
Elsewhere, the US has also ramped up pressure on OPEC member Venezuela, including strikes against boats it said were attempting to smuggle illegal drugs, and talk of military action to overthrow President Nicolas Maduro.