Oil prices slide on optimism over potential Ukraine–Russia peace deal

By Rara Suratmi

Oil prices fell sharply on Tuesday, dropping below US$60 per barrel for the first time since February 2021, as markets reacted to signs that a peace deal between Ukraine and Russia could be moving closer.

European gas prices followed a similar trajectory, falling below €27 per megawatt-hour, about 16% lower than levels seen in mid-November, according to market data cited by Rystad Energy.

The sell-off was triggered by reports of ongoing negotiations in Germany, where the United States is said to have offered NATO-style security guarantees to Ukraine. The proposal, combined with comments from US President Donald Trump suggesting the conflict may be closer to resolution than at any point so far, prompted investors to reassess geopolitical risks to energy supply.

Jorge León, head of geopolitical analysis at Rystad Energy, said a ceasefire could significantly alter global oil market dynamics by easing constraints on Russian supply.

“In the event of a ceasefire, US sanctions on Russian oil companies would likely be lifted relatively quickly, while European sanctions would probably be removed more gradually,” León said. “At the same time, attacks on Russian oil infrastructure would come to an end, reducing the risk of near-term supply disruptions.”

Rystad Energy estimates that nearly 170 million barrels of Russian oil currently stored at sea could return to the market if sanctions are eased and trade flows normalize. Such a development would add substantial volumes to global supply at a time when demand growth remains uncertain.

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A potential lifting of sanctions would also reshape incentives within the OPEC+ alliance, León said. Russia would be able to continue increasing production, while narrowing discounts on Russian crude could encourage the group to shift back toward a market-share strategy after a planned pause in the first quarter of 2026.

Despite the current optimism, Rystad cautioned that energy markets have previously reacted prematurely to peace signals that later failed to materialize.

 “Over the past year, markets have come close to pricing in a peace deal several times, only for talks to stall,” León said. “While the current optimism is clearly weighing on prices, its durability will depend on tangible progress toward a credible and lasting agreement.”

Until clearer outcomes emerge from negotiations, Rystad Energy said oil and gas markets are likely to remain highly sensitive to political developments and headline-driven volatility.

Editing by Alexander Ginting