HOUSTON, – Oil prices settled more than 2% lower on Friday as investors weighed a looming global supply glut, while also keeping an eye on a potential Ukraine peace deal ahead of talks this weekend between Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump.

Brent crude futures settled down $1.60 or 2.57% to $60.64 per barrel. U.S. West Texas Intermediate crude settled down $1.61 or 2.76% to $56.74.

While supply disruptions have helped oil prices rebound in recent sessions from their near five-year low on December 16, they are on track for their steepest annual decline since 2020. Brent and WTI are down 19% and 21% respectively on the year, as rising crude output caused concerns of an oil glut heading into next year.

“Geopolitical premiums have provided near-term price support, but have not materially shifted the underlying oversupply narrative,” Aegis Hedging analysts said in a note on Friday.

The global oil supply next year will exceed demand by 3.84 million barrels per day, according to figures from the Paris-based IEA’s December oil market report.

EYES ON RUSSIA-UKRAINE PEACE PROCESS

Investors are watching for developments in the Russia-Ukraine peace process and the possible impact on future oil prices, as a peace agreement could lead to the removal of international sanctions against Russia’s oil sector.

Zelenskiy will discuss territorial issues, the main stumbling block in talks to end the war, with Trump in Florida on Sunday, as a 20-point peace framework and a security guarantees deal near completion.

Announcing the meeting, Zelenskiy said that “a lot can be decided before the New Year.”

The Ukrainian president also told Axios he would be willing to call a referendum on an agreed peace framework if Russia agrees to a ceasefire.

A foreign policy aide to Russian President Vladimir Putin spoke to members of the U.S. administration after Moscow received U.S. proposals about a possible Ukrainian peace deal, the Kremlin said on Friday.

For the oil price, “the negatives remain of elevated global oil storage, and slight progress on Ukraine-Russia peace talks,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The White House also ordered its military forces to focus on a “quarantine” of Venezuelan oil for at least the next two months, indicating Washington is currently more interested in using economic rather than military means to pressure Caracas.

“The global impact to crude prices looks minimal at this time,” Kissler said of U.S. actions to intercept sanctioned oil tankers leaving and entering Venezuela.

Despite headline risk pertaining to Venezuela, the broader market remains focused on the growing global surplus, according to Aegis Hedging analysts.

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