Oil Hits One-Month Low as Ukraine Peace Talks Erode Risk Premium
WTI crude futures fall over 3% on the week as progress in U.S.-brokered negotiations stokes fears of a global supply glut, pressuring energy stocks.
Oil prices slumped to their lowest level in a month this week, as diplomatic progress between Russia and Ukraine threatens to unwind the geopolitical risk premium that has supported the market for more than a year.
West Texas Intermediate (WTI) crude futures fell more than 3% during the week, dipping below $58 a barrel in Friday trading to settle near $57.50. The decline reflects growing investor speculation that a potential peace deal could ease sanctions on Russian energy exports, adding significant supply to a market already showing signs of softness.
The catalyst for the sell-off centers on high-level talks held in Geneva, where U.S. and Ukrainian officials are discussing a U.S.-proposed peace plan. U.S. Secretary of State Marco Rubio described the initial sessions as "probably the most productive and meaningful meeting" since the new administration took office, according to reports from CBS News. The proposal reportedly includes significant concessions that could lead to a de-escalation of the conflict and, critically for energy markets, a potential rollback of sanctions against major Russian producers like Rosneft and Lukoil.
This diplomatic thaw is shifting market focus away from supply risks and back toward fundamental supply-and-demand balances. The prospect of Russian crude returning unrestricted to the global market comes at a time of rising production from non-OPEC+ countries and lackluster demand growth projections. Global oil inventories surged in the third quarter and are expected to continue climbing, creating a challenging backdrop for oil prices.
"The geopolitical premium is evaporating before our eyes," said one energy strategist. "For months, the market was supported by the risk of conflict-related disruptions. Now, it's being forced to confront the reality of a well-supplied market and tepid demand."
The pressure was felt across the energy sector. While the broader S&P 500 advanced, energy stocks lagged, with major refiners such as Valero Energy seeing shares drop. This performance continues a trend of volatility for the sector, which has struggled to maintain momentum in 2025 after a stronger showing in the previous year.
The downturn in crude created a notable divergence with other energy commodities, as natural gas futures rallied on separate supply and weather-related factors. This split highlights the complex dynamics at play, with oil markets uniquely sensitive to the outcome of the peace negotiations.
Investors are now closely watching for Ukraine's response to the U.S. proposal. While the prospect of peace is applying downward pressure, the situation remains fluid. A failure in negotiations could quickly reignite supply concerns and cause prices to rebound. However, for now, the path of least resistance for oil appears to be lower as the market recalibrates for a world with potentially fewer geopolitical constraints on supply.