Oil prices edged lower this week amid rising expectations of a potential ceasefire between Ukraine and Russia, a development that could open the door to easing Western sanctions on Russian crude. In addition, market activity was expected to remain subdued due to the U.S. Thanksgiving holiday.
The key driver in oil markets this week is the growing momentum toward a potential peace agreement between Russia and Ukraine. U.S. envoy Steve Witkoff is expected to travel to Moscow next week alongside other senior American officials for discussions with Russian leaders on a potential framework to end the nearly four-year war in Ukraine.
Recent reports have suggested that Kyiv has largely signed off on a deal, with only minor details still under discussion. The possibility that a deal could clear the way for increased Russian crude exports, at a time when global inventories are already well supplied, is likely to keep downward pressure on oil prices in the days ahead.
“The crude oil markets are facing an overriding downside risk due to the expected peace framework between Russia and Ukraine, which, upon ratification, could remove sanctions and flood the markets with Russian oil. The bearish bias here is supported by supply projections, with analysts and EIA predicting a surplus of at least 2 million bpd in 2026 and Brent averaging $54 in the first quarter of 2026, hence indicating a continued build in inventories,” said Vijay Valecha, chief investment officer, Century Financial.
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) are expected to keep production targets steady at their meeting on Sunday. Several members of the coalition, which accounts for roughly half of global oil output, have been increasing production since April in a bid to capture greater market share.
“Conversely, actual disruptions related to U.S. sanctions affecting 1.4 million bpd in floating storage and some reduction in the shipment of Russian oil products through India and China are mitigating the negative, in addition to high distillate crack,” added Valecha.
Meanwhile, expectations of a U.S. Federal Reserve interest rate cut in December helped cushion the downturn in oil prices. A reduction in borrowing costs generally supports economic activity and, in turn, strengthens oil demand.
While prospects for stronger demand, driven by potential U.S. rate cuts or seasonal trends, still offer some support, the broader outlook continues to lean toward oversupply, echoing recent forecasts that point to a surplus emerging in 2026.
The upcoming OPEC+ meeting introduces an additional element of uncertainty. Traders will be watching for any guidance on production quotas or strategic shifts that could help stabilize prices or, conversely, deepen the current bearish sentiment. For now, expectations suggest the alliance is unlikely to revise its first-quarter production plans or adjust its collective output targets for 2026.
Some good news for fuel card users as prices will fall in the region of 2 -4 pence per litre depending on fuel card type as we head into the first week of December.
