Oil prices fell on Thursday amid talks of a potential peace deal between Ukraine and Russia that would usher in the end of sanctions that have disrupted supply flows. In the previous session, U.S. President Donald Trump also said he intends to introduce reciprocal tariffs which raised inflation concerns.
As of 5:06 GMT, Brent crude futures decreased 1.06 percent to $74.38 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude fell 1.06 percent to $70.61 a barrel.
Potential easing of Russia sanctions to increase supply
Brent and WTI fell more than 2 percent on Wednesday after Trump said Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy expressed a desire for peace in separate phone calls with him. Following the calls, Trump ordered top U.S. officials to begin talks to end the war in Ukraine.
Russia is the world’s third-largest oil producer and sanctions imposed on its crude exports as a result of its invasion of Ukraine nearly three years ago have supported higher prices. The sanctions by the U.S. and EU were pushing Russia’s oil output lower.
Signs of tightening supply have been pushing up oil prices in recent weeks. Therefore, with potential sanctions on Russia easing, the country’s oil supply is expected to rise again.
Trade war fears mount
Trump threatened additional tariffs against U.S. trade partners which also impacted oil prices due to concerns that tariffs may reduce economic growth and therefore oil demand. Trump said he would impose reciprocal tariffs as soon as Wednesday evening on every country that charges duties on U.S. imports, further raising fears of a widening global trade war which will likely raise U.S. inflation.
Trump had previously announced tariffs targeting Canada, Mexico and China but suspended those for the neighboring countries the following day. Such tariffs could potentially hinder global economic growth as well as energy demand.
Oil prices also resumed their downtrend as the macro environment weighed on sentiment, with Federal Reserve Chair Jerome Powell indicating that the U.S. Fed was not in a rush to lower rates. Powell said the recent inflation data showed that while the central bank has made substantial progress toward taming inflation, there is still more work to do.
Powell also noted on Tuesday that the Fed is not rushing to cut interest rates further due to strength in the job market and solid economic growth.
Read: Global oil demand to rise by 1.45 million barrels per day in 2025, says OPEC
U.S. oil inventories gain 4.1 million barrels
An increase in crude oil inventories in the U.S., the world’s biggest crude consumer, also weighed on the market. U.S. crude stocks rose more than expected last week, according to the latest data from the Energy Information Administration (EIA).
Crude inventories rose by 4.1 million barrels to 427.9 million barrels in the week ended February 7, the EIA said, compared to a rise of 8.664 million barrels in the previous week. The market consensus estimated that stocks would increase by 2.8 million barrels.
The EIA has revised its estimate for U.S. crude production upwards, now projecting an average output of 13.59 million barrels per day in 2025, a slight increase from the previous estimate of 13.55 million barrels per day, while maintaining its demand forecast.
