Oil Prices Volatility: Russia-Ukraine Peace Talks Face Obstacles and Escalating Tensions

Oil prices are currently experiencing volatile trading as the market grapples with two opposing forces: hopes for a peaceful settlement that could increase Russian supply, and persistent warnings and tensions that are supporting crude prices.

Price Movement and Current Landscape

Oil prices rose on Wednesday in volatile trading, as investors remained focused on the peace talks between Russia and Ukraine. Brent crude climbed nearly 2% to around $63.00 a barrel, while West Texas Intermediate (WTI) crude surpassed $59.00 a barrel after an earlier decline in the session.

This volatility reflects a wait-and-see approach in the market, balancing glimmers of hope for peace with harsh Russian statements that threaten to escalate the crisis.

Analysis of Factors Affecting Prices

1- Peace Talks and Their Complex Path

According to reports, US envoy Steve Witkopf arrived in Moscow to meet with Russian President Vladimir Putin, a move interpreted as the start of talks on a potential peace agreement. It is believed that any real progress toward peace could lead to the lifting of Western sanctions on Russian oil exports, allowing millions of additional barrels to flow into the global market.

However, markets seem to be pricing in a high probability of no agreement being reached soon.

European diplomats express doubts about this possibility, recalling Russia’s past acceptance of initiatives under pressure without actually implementing them.

2. Military Escalation and Threats

In stark contrast to the atmosphere of negotiation, Russian rhetoric has escalated again. Ahead of the US envoy’s meeting in Moscow, Putin warned European powers against waging war on Russia and threatened retaliatory measures against ships of countries assisting Ukraine.

Meanwhile, Ukrainian attacks on Russian energy infrastructure, including terminals and tankers, continue, limiting Russian refining capacity and exports.

3. Fundamental Factors: Supply Oversupply and the OPEC+ Decision

The fundamental factors of the oil market stand as a crucial backdrop to these geopolitical fluctuations.

The oil market is currently experiencing a supply glut, with OPEC predicting a shift from a global deficit to a surplus.

The OPEC+ alliance also decided during its meeting on Sunday to suspend planned gradual production increases for the first quarter of 2026, a move aimed at preventing the anticipated surplus from worsening and stabilizing prices.