Oil prices slid beneath the $60-a-barrel mark on Tuesday, hitting their lowest levels since May, as optimism around potential Russia-Ukraine peace talks raised expectations that sanctions could eventually be relaxed.
Brent crude futures were down $1.03, or about 1.7%, at $59.53 a barrel by 13:40 GMT. U.S. West Texas Intermediate crude also weakened, falling $1.06, or 1.9%, to $55.76 a barrel.
“Brent has dropped this morning to below $60 per barrel for the first time in months, as the market assesses a potential peace deal resulting in additional Russian volumes becoming available and oversupplying the market further,” said Rystad analyst Janiv Shah.
Market sentiment was buoyed by reports that the United States has offered NATO-style security guarantees to Kyiv, while European negotiators signaled progress in discussions on Monday, fueling hopes that the conflict could be nearing an end.
Russia, however, reiterated that it is unwilling to concede territory, according to comments from Deputy Foreign Minister Sergei Ryabkov cited by state news agency TASS.
“The grind in talks will be matched with the continued grind lower in prices as we enter 2026 with all its associated predictions of ’glut.’ Brent will make a fresh year-to-date low, but will not break below $55 a barrel before the year is out,” said PVM Oil Associates analyst John Evans.
Reflecting growing supply concerns, the six-month Brent futures spread flipped into contango for the first time since October.
Barclays analysts said they expect Brent to average $65 per barrel in 2026, slightly above current forward prices, noting that the market has already priced in an anticipated surplus of around 1.9 million barrels per day.
Additional pressure came from disappointing economic data out of China, which renewed worries that global demand may struggle to absorb rising supply, according to IG market analyst Tony Sycamore.
Official figures showed China’s factory output growth slowed to a 15-month low, while retail sales expanded at their weakest pace since December 2022, during the height of the COVID-19 pandemic.
Concerns about oversupply were only partially offset by the U.S. seizure of an oil tanker off Venezuela last week. Traders noted that ample floating storage and a recent surge in Chinese purchases of Venezuelan crude ahead of possible sanctions have also muted the market impact.