Oil prices experienced a significant downturn, falling by over 2% in Friday’s trading session. This decline reflects investor sentiment regarding a potential oversupply in the market and a lessening of war risk premiums. Market participants are also closely monitoring the possibility of a peace agreement in Ukraine early next week, reportedly involving Ukrainian President Volodymyr Zelensky and US counterpart Donald Trump.
Specifically, Brent crude futures decreased by $1.60, or 2.57%, settling at $60.64 per barrel. West Texas Intermediate (WTI) crude also saw a considerable drop, falling by $1.61, or 2.76%, to reach $56.74 per barrel.
These losses position oil prices to record their most substantial annual decline since 2020. This is despite recent supply disruptions that had provided some support to prices in previous sessions. The market had previously rebounded from levels near a five-year low, recorded on December 16th.
Analysts suggest that the projected increase in production capacity, coupled with concerns about global economic growth, are contributing factors to the downward pressure on prices. The potential for a negotiated settlement in the Ukrainian conflict has further eased concerns about supply disruptions, impacting market confidence.
The outlook for oil prices remains uncertain, with various factors influencing market dynamics. The upcoming week will be crucial in determining whether the potential peace talks materialize and what impact they will have on global energy markets.
