Khaberni - The price of West Texas Intermediate crude, the American benchmark in oil prices, fell on Tuesday to its lowest level in nearly 5 years influenced by progress in negotiations concerning Ukraine and the potential for a surplus in supply.
Around 16:00 GMT, the price of West Texas Intermediate crude for January delivery fell by 2.64% to $55.32 per barrel, after reaching its lowest level at $54.98, a level not seen since February 2021.
Meanwhile, European Brent crude from the North Sea for February delivery fell by 2.53% to $59.03 per barrel, having earlier on Tuesday fallen below $60 for the first time since May.
Ukrainian President Volodymyr Zelensky welcomed the "progress" made in negotiations with the United States to end the war with Russia on Monday, which could lead to an easing of sanctions imposed on Russian oil.
U.S. President Donald Trump said, "We are today closer than ever" to reaching an agreement.
Analysts at "DNB Bank" indicate that "the progress made in peace talks reduces geopolitical risk" that had supported oil prices until now.
According to the International Energy Agency, Moscow's exports decreased by 420,000 barrels per day in November, amid U.S. sanctions and drone strikes carried out by Ukraine.
Thus, reaching an agreement may lead to an increase in oil flow to the market by facilitating the return of large quantities of Russian oil.
Analyst Darren Nathan at "Hargreaves Lansdown" notes that "many failed attempts have marked this year" in the discussions concerning Ukraine.
According to Kathleen Brooks from "XTB", the market is also "focusing on the expected surplus in the oil market, as well as indicators of supply exceeding demand in the Gulf and the United States."
The value of immediate delivery crude oil from the Middle East is lower than that delivered at later terms, a clear indicator of a short-term supply surplus.
The process of storing oil incurs costs, explaining the lack of incentive for market participants to store it unless the profit is significant.
However, concerns still exist regarding demand amid increased production quotas by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
