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Oil falls below $60 as Ukraine ceasefire optimism eases supply fears
Sopuruchi Onwuka, with agency reports
Oil prices fell below $60 per barrel on Tuesday, their lowest level since February 2021, as easing geopolitical tensions prompted investors to reassess supply risks. European gas prices followed the same trend, dropping below €27 per megawatt-hour, about 16% lower than mid-November levels.
Market sentiment was buoyed by reports from ongoing negotiations in Germany that the United States has offered Ukraine NATO-style security guarantees. The proposal, described as similar to Article 5 protections, alongside comments from President Donald Trump that the conflict may be closer to resolution than at any point so far, has fuelled optimism across European markets.
The prospect of a ceasefire has led oil markets to price in a lower risk of supply disruptions, particularly from Russia.
In a market update, Rystad Energy’s Head of Geopolitical Analysis, Jorge Leon, said a ceasefire could trigger a rapid easing of US sanctions on Russian oil companies, while European sanctions would likely be lifted more gradually.
“Attacks on Russian oil infrastructure would also cease, significantly reducing the risk of near-term supply disruptions,” Leon said. “This would allow a substantial volume of Russian crude currently stored on water, estimated at nearly 170 million barrels, to return to the market.”
Leon added that the removal of sanctions could alter dynamics within the OPEC+ alliance. With Russia able to continue ramping up production, the group may be more inclined to pursue a market-share strategy once its planned production pause ends in the first quarter of 2026.
He noted that discounts on Russian crude would likely narrow as trade flows normalise.
However, Leon cautioned that markets may be moving too quickly to price in a peace deal.
“Over the past year, markets have repeatedly come close to pricing in a resolution, only for negotiations to stall,” he said. “While the current optimism is clearly weighing on prices, its durability will depend on tangible progress toward a credible and lasting agreement. Until then, markets will remain highly sensitive to political headlines.”
