Oil prices fell nearly 2% on Monday after Iraq restored output at the West Qurna-2 field, removing a supply disruption that had briefly supported prices. Brent settled at $62.49, down $1.26, while WTI ended at $58.88, down $1.20. Both benchmarks had closed on Friday at their highest levels since November 18 before giving back gains as the restored production — roughly 460,000 barrels per day, or about 0.5% of global supply — came back online.
The market continued to follow diplomatic efforts around a potential Russia-Ukraine settlement, with traders weighing how much additional Russian crude could return if an agreement is reached. Analysts noted that any deal allowing sanctions relief could shift more than 2 million barrels per day back into global flows, though negotiations remain slow and politically fraught. Ukrainian President Volodymyr Zelenskiy met European leaders in London as disagreements over security guarantees and the status of occupied territory continued to stall progress.
Expectations for a Federal Reserve rate cut added another layer to trading sentiment. Markets are pricing in a high probability of a quarter-point reduction at this week’s meeting, though policymakers’ public comments suggest a notably divided committee. Lower rates would support economic activity, but for now uncertainty around the Fed’s direction kept markets cautious.
Broader supply outlooks also weighed on crude. Rising OPEC+ and non-OPEC production continues to outpace modest demand growth, reinforcing expectations of a market surplus next year. Analysts highlighted that a ceasefire in Ukraine represents the biggest downside risk for prices, while persistent damage to Russian energy infrastructure remains one of the few meaningful upside catalysts.
At the same time, G7 and EU members are discussing replacing the current price-cap system on Russian exports with a full maritime services ban — a move that would further restrict Russia’s ability to ship crude. The U.S. has also increased pressure on Venezuela, raising the prospect of additional disruptions from another OPEC member.
In Asia, independent Chinese refiners have increased purchases of Iranian crude using newly issued quotas, helping absorb onshore storage and easing some of the recent global oversupply. Ahead of this week’s government data, early estimates suggested U.S. crude inventories likely declined last week, while gasoline and distillate stocks may have increased.