Oil Prices Slide as Ukraine Agrees to Work on US–Russia Draft Peace Plan

Oil prices fell on Thursday after Ukrainian President Volodymyr Zelenskyy said he had agreed to work on a draft peace plan jointly prepared by the United States and Russia, raising expectations that the two-year war may be moving toward a negotiated end. 

Markets reacted swiftly to the rare diplomatic opening, pricing in the possibility of a future easing of sanctions on Russian crude, a factor that could inject significant new supply into an already fragile market.

West Texas Intermediate (WTI) slid toward $59 a barrel before trimming some losses, while Brent crude fell toward $63 as traders reassessed geopolitical risk premiums that have supported prices for much of the conflict.

Latest Oil Prices: 

WTI Crude  $58.20 -1.36%

Brent Crude $62.59 -1.25%

Murban Crude $64.25  -0.89%

Louisiana Light $62.51 +1.38%

Bonny Light $78.62 -2.84%

Opec Basket $64.54 -0.17%

Mars US  $70.71 -1.34%

Gasoline $1.901 -0.91%

The prospect of a peace framework, even in early, uncertain form, immediately pressured crude benchmarks. 

A post-war scenario could unlock Russian output constrained by Western sanctions since the 2022 invasion of Ukraine. Russia remains the world’s third-largest oil producer, and any surge in its exports would coincide with an already weakening market outlook.

Oil traders have been preparing for a potential surplus as production rises across both OPEC+ members and non-aligned producers, setting up crude for a likely full-year loss. The idea that Russian barrels could re-enter markets more freely sharpened those fears.

The timing added further weight: Zelenskyy’s remarks came hours before new U.S. sanctions targeting Russia’s two largest oil companies, Rosneft and Lukoil, were due to take effect. Those measures are expected to reconfigure global crude flows and complicate sales channels Moscow has relied on.

For years, Russia has relied on a murky web of “shadow channels” to keep sanctioned crude moving, deploying obscure intermediaries, reflagged tankers, and opaque trading hubs. But with global prices falling and new U.S. restrictions imminent, analysts warn Moscow’s oil revenues are set to shrink, posing risks to its state budget and broader economy.

Despite the market reaction, the path to peace remains far from clear. According to a person familiar with the discussions, the United States informed Zelenskyy that he must accept a version of the plan drafted in consultation with Moscow, a proposal that includes Russian demands Kyiv has repeatedly deemed unacceptable.

These sticking points have derailed previous attempts to initiate cease-fire negotiations. Many in Kyiv fear that Moscow’s engagement may be tactical, aimed at buying time or easing pressure ahead of sanctions coming into force.

Rachel Ziemba, senior fellow at the Center for a New American Security, noted that while Ukraine’s willingness to discuss an end to the war is noteworthy, Russia’s intentions remain in doubt.

Earlier in the day, oil had risen as traders priced in the expected disruption from the incoming U.S. restrictions. Those sanctions have already influenced shipping routes, particularly toward India, a major buyer of Russian crude. Lukoil has been forced to seek new buyers for some of its international assets as a result of tightening constraints.

But with markets convinced that Russian supply will continue to reach global consumers through illicit or lightly regulated pathways, traders appear reluctant to price in significant lasting shortages.

“Markets seem to expect Russian fuel supplies to keep reaching the market through illicit channels,” Ziemba said.