Global crude oil markets witnessed a significant downturn on Friday, with prices falling approximately 2% to reach their lowest levels in a month. This sharp decline was primarily driven by renewed United States efforts to broker a peace agreement between Ukraine and Russia, which could potentially unlock more Russian oil into global markets.
Price Plunge and Market Sentiment
Brent crude futures dropped by $1.05, settling at $62.33 per barrel, marking a 1.7% decrease during afternoon trading in New York. Meanwhile, US West Texas Intermediate crude slipped $1.17 to $57.83 per barrel, representing a 2.0% fall. Both major oil benchmarks recorded weekly losses exceeding 3%, heading toward their weakest closing positions since October 21.
Market sentiment turned distinctly bearish as Washington intensified its push for a peace plan to end the three-year conflict between Ukraine and Russia. The timing coincided with US sanctions targeting Russian oil giants Rosneft and Lukoil scheduled to take effect the same day.
Diplomatic Moves and Their Market Impact
Ukrainian President Volodymyr Zelenskiy expressed serious concerns about the US peace proposal, stating that Ukraine faced difficult choices between preserving its dignity and freedom or maintaining Washington's support. The plan reportedly endorses key Russian demands, with US President Donald Trump urging Kyiv to agree by Thursday.
Russian President Vladimir Putin confirmed that Moscow had received the US proposals and acknowledged the plan could serve as foundation for peaceful conflict resolution. A potential peace deal could enable Russia to increase fuel exports significantly, particularly important given that Russia ranked as the world's second-largest crude oil producer after the United States in 2024 according to US federal energy data.
Jim Reid, a managing director at Deutsche Bank, observed that "oil markets saw some relief on risks to Russian oil supply with the news of talks coming just as US sanctions on Russia's two largest oil companies are due to take effect today."
Economic Factors and Future Outlook
However, analysts at ANZ cautioned clients that "an accord is far from certain," noting that Kyiv has repeatedly dismissed Moscow's demands as unacceptable. The market also showed increasing skepticism about the effectiveness of latest restrictions on Rosneft and Lukoil, with Lukoil having until December 13 to divest its substantial international portfolio.
Additional pressure on oil prices came from a strengthening US dollar, which hit a six-month high against other currencies. A stronger dollar typically makes dollar-denominated crude more expensive for international buyers using other currencies.
Uncertainty around US interest rates further curbed investor risk appetite. Dallas Fed President Lorie Logan advocated maintaining current policy rates "for a time" to assess economic impact, while Boston Fed President Susan Collins suggested monetary policy remains appropriately positioned. Conversely, New York Fed President John Williams indicated the central bank could still cut rates "in the near term" without jeopardizing inflation targets.
Separate economic data revealed US factory activity slowing to a four-month low in November, as tariff-driven price increases restrained demand and led to inventory accumulation that could hinder broader economic growth.
