By: Economy Middle east

Oil prices witnessed a marginal decline on Friday after posting notable gains in the previous session, as diplomatic efforts to end the Ukraine-Russia war stalled and expectations of a U.S. Federal Reserve rate cut helped bolster market sentiment.

As of 6:02 GMT, Brent crude fell 5 cents, or 0.08 percent, to $63.21 per barrel. The contract was largely stable during the week. Meanwhile, U.S. West Texas Intermediate (WTI) declined 11 cents, or 0.18 percent, to $59.56 a barrel. Despite today’s decline, WTI logged a weekly gain of about 1.6 percent and marked a second straight week of increase.

Both contracts settled up around 1 percent in the previous session.

U.S.-Russia peace talks end without clear breakthrough

Oil prices gained support this week after U.S.-Russia discussions ended without a clear breakthrough toward a ceasefire. The absence of progress reduced expectations that sanctions on Russian oil would ease anytime soon, maintaining a risk premium in the market.

According to analysts, the stalled talks strengthened the view that supply pressures may continue, particularly in light of recent Ukrainian attacks on Russian energy facilities.

“Geopolitical risks are adding a further layer of support as Ukrainian attacks on the Druzhba oil pipeline in Russia’s central Tambov region signalled potential supply constraints, and stalled peace talks tempered expectations of a deal restoring Russian oil flows to global markets,” said Vijay Valecha, chief investment officer, Century Financial.

Markets were also on alert for the possibility of a U.S. military operation in Venezuela after President Donald Trump said late last week that the U.S. would begin taking action on the ground “very soon” to curb Venezuelan drug trafficking.

In a note, Rystad Energy warned that such an intervention could threaten Venezuela’s 1.1 million barrels per day of crude output, most of which is exported to China.

Fed rate cut expectations rise

Oil prices also found support amid rising expectations that the Federal Reserve may cut interest rates at next week’s meeting, with futures indicating a high likelihood of a 25-basis-point move. Investors have increasingly leaned toward the view that the Fed could start easing as economic momentum shows signs of cooling.

Recent U.S. labor market data reinforced this sentiment, with weekly jobless claims falling sharply to 191,000, the lowest since September 2022, though economists cautioned that holiday-related factors may have influenced the figure. Meanwhile, a private payrolls report earlier in the week showed U.S. companies shed 32,000 jobs in November, pointing to softer hiring.

Attention is now turning to Friday’s release of the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, where a weaker reading could further support expectations for rate cuts.

“Oil prices continued to find support from API’s crude inventory report, as the reading reported a fall in crude oil inventory by 2.48 million barrels, as compared to the fall of 1.90 million barrels previously,” added Valecha.

The EIA crude oil inventory report also supported the API report, as the increase in crude oil stocks of 574,000 barrels was significantly less than the previous reading of 2.77 million barrels.

“The U.S. administration’s proposed rollback of its fuel-economy standards also suggests a longer-term policy shift that could lift domestic fossil-fuel demand, supporting prices,” he concluded.