Oil prices fell about 1 per cent on Friday to settle at one-month lows on oversupply concerns as the US proposed a plan to end the Ukraine war, which has disrupted global commodity markets for more than three years.
Brent, the global benchmark for crude oil, dropped 1.3 per cent to settle at $62.56 per barrel. West Texas Intermediate, the US gauge for crude, closed 1.6 per cent lower at $58.06.
Both crude benchmarks were down about 3 per cent for the week.
“Crude futures were under a stronger downward momentum … after settling marginally lower as the US-led diplomatic push on Ukraine gathered pace,” said Vandana Hari, chief executive of Singapore-based Vanda Insights.
The US plan to end the Ukraine war, which began in February 2022, involves Kiev ceding territory to Russia and limiting the size of its military.
As part of a 28-point peace plan backed by US President Donald Trump, Ukraine would be required to give up the eastern Donbas region, which comprises the Luhansk and Donetsk areas, AFP reported. Kyiv would also need to limit its army to 600,000 personnel.
Russia, one of the largest oil producers, would also be reintegrated into the global economy by the lifting of sanctions. It would return to what was formerly known as the Group of Eight (G8), which includes some of the world's biggest economies.
The peace plan, if implemented, could add to the oversupply concerns in oil markets as Opec+ boosts supply to regain its market share.
The group, led by Saudi Arabia and Russia, agreed to another output increase of 137,000 bpd for December.
“We anticipate potential oversupply next year of up to two million barrels per day, which is quite substantial,” Marco Dunand, chief executive and co-founder of Mercuria, a Swiss-based commodity trading company, said at the Adipec conference in Abu Dhabi this month.
“Glut is forming slowly and probably is going to hit the market in the next few months.”
The US imposed heavy sanctions on Russia’s Lukoil and Rosneft last month to curtail its oil revenue.
The sanctions took effect on Friday and could leave nearly 48 million barrels of Russian crude stranded on the water, Bloomberg reported citing shipping data from analytics firm Kpler.
