Oil prices took a hit, falling below $75 per barrel, after former U.S. President Donald Trump announced his efforts to broker peace talks between Russia and Ukraine......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
Trump stated on social media that he and Russian President Vladimir Putin had agreed to begin peace negotiations, with their teams set to start discussions immediately. Trump also mentioned that he would be reaching out to Ukrainian President Volodymyr Zelenskyy to inform him about the planned talks.
As news of the potential peace discussions spread, oil prices reacted immediately:
Brent crude, the global oil benchmark, dropped by 0.8%, settling at $74.24 per barrel.
The U.S. benchmark, West Texas Intermediate (WTI), fell by 0.9%, closing at $70.47 per barrel—down from its previous session price of $71.16 per barrel.
One major reason for the drop in prices was the unexpected increase in U.S. crude oil stockpiles. According to data from the U.S. Energy Information Administration, U.S. commercial crude oil inventories grew by 4.1 million barrels last week, reaching a total of 427.9 million barrels. This was much higher than the 2.8 million barrels increase that analysts had predicted.
The larger-than-expected increase in oil storage suggests that demand for oil in the U.S.—the world’s biggest oil consumer—may be slowing down, putting downward pressure on prices.
Additionally, concerns over U.S. economic policies also played a role in the decline of oil prices. Investors are worried that Trump’s potential return to the White House could disrupt the Federal Reserve’s (Fed) ongoing efforts to control inflation.
Recent U.S. inflation data showed that:
The Consumer Price Index (CPI), which measures the average change in prices over time, rose by 0.5% in January compared to the previous month.
On a yearly basis, inflation stood at 3%, exceeding market expectations.
This was the fastest monthly increase in prices since August 2023 and the highest annual inflation rate recorded since July 2024.
The rising inflation means that interest rates in the U.S. could remain high for longer than expected, increasing fears of an economic slowdown. A slowing economy typically results in lower energy consumption, which can reduce demand for oil.
Meanwhile, the possibility of peace talks between Russia and Ukraine also influenced the oil market. If a peace agreement is reached, it could lead to the lifting of some Western sanctions on Russian oil exports. This would increase the global oil supply, further pushing prices down.
Ukrainian President Zelenskyy confirmed that he spoke with Trump about the prospects of peace. Trump also stated that he had discussed the matter with Putin, who reportedly supported the idea of working towards a resolution.
Adding to the downward pressure on oil prices, OPEC’s latest monthly report revealed that its crude oil production had declined in January. The organization reported a drop of 121,000 barrels per day, bringing its total production to 26.6 million barrels per day. This supply reduction may help prevent further price declines but is unlikely to offset the larger forces affecting the market.
In summary, oil prices are facing downward pressure due to multiple factors: rising U.S. crude inventories, concerns about economic policies and inflation, and the potential for peace in the Russia-Ukraine conflict, which could lead to increased oil supply from Russia.