Oil falls on Ukraine peace plan as Russia sanctions set to start

Oil pushed lower after Ukrainian President Volodymyr Zelenskiy agreed to work on a peace plan, just as US sanctions on two Russian oil giants are scheduled to take effect on Friday.

West Texas Intermediate dropped for a third session toward $58 a barrel, while Brent closed near $63 on Thursday. The plan was drafted by the US and Russia and Zelenskiy expects to talk with President Donald Trump in the coming days. Proposals include Ukraine ceding territory and the removal of sanctions.

European diplomats expressed skepticism about any deal, noting that Russian President Vladimir Putin has a track record of appearing to accept overtures when under pressure. The Kremlin is trying to stop US penalties targeting the nation’s two largest oil companies, Rosneft PJSC and Lukoil PJSC.

Still, if there is progress on a peace deal and sanctions are removed, that would add more supply to a market facing a large surplus next year. OPEC+ and other producers, most notably from the Americas, have ramped up output, with the bearish outlook putting oil prices on track for an annual loss.

The sanctions on Rosneft and Lukoil could leave nearly 48 million barrels of oil stranded on the water. India refiners are seeking alternatives after years of taking the cheaper crude, including Reliance Industries Ltd., which has said it will stop processing Russian grades at part of its major Jamnagar refinery.

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