Oil prices fall as easing geopolitical tensions cool market sentiment

Oil prices continued to slide on Friday, marking a third straight day of decline, as investors weighed the possibility of a Russia Ukraine peace agreement and braced for uncertainty over United States interest rate cuts. The shift in sentiment has added pressure on an already soft market outlook, making traders more cautious as the week draws to a close.

Brent crude slipped to about 62 dollars and 67 cents a barrel during early trading, while West Texas Intermediate traded near 58 dollars and 29 cents. Both benchmarks are on course for a weekly drop of more than 2 percent as oversupply concerns resurface.

Talks around Washington’s push for a peace deal between Ukraine and Russia have stirred speculation that more Russian oil could eventually return to the global market. Even though sanctions on major Russian producers Rosneft and Lukoil are scheduled to take effect on Friday, traders are watching for any sign of compromise that might alter the supply picture. Lukoil has been given until December 13 to offload its sizeable international holdings.

Market experts said the idea of a possible breakthrough, even if unlikely, has chipped away at the geopolitical risk premium that has supported prices since the conflict began. IG analyst Tony Sycamore noted that Ukraine has not formally rejected the proposed deal, which leaves room for speculation and continues to drag on crude futures.

Stronger dollar adds pressure

A firm US dollar also contributed to the downward trend. Since oil is priced in dollars, a stronger currency raises costs for buyers using other currencies, often leading to weaker demand and lower prices.

The dollar appeared headed for its best weekly performance in more than a month as investors grew doubtful that the Federal Reserve would cut interest rates next month. This added another layer of caution across commodity markets, where appetite for risk has already been thinning.

A week marked by caution

With concerns about oversupply, shifting geopolitical winds and currency movements all acting at once, traders spent much of the week searching for clarity. For now, the mood remains cautious, and the market seems set to close the week on a softer note.