Prices on crude oil jumped by more than 2% Monday morning as investors sought to balance any progress on peace talks in Ukraine with falling output and rising geopolitical tensions in the Middle East.
Futures on Brent crude (BZ=F), the international pricing benchmark, gained roughly 2.2% to sit above $61.50. West Texas Intermediate (WTI) crude (CL=F), the US benchmark, picked up 2.4% to land above $58.
In comments at Mar-a-Lago on Sunday, President Trump and Ukrainian leader Volodymyr Zelensky said substantial progress has been made toward reaching a deal to end the conflict in Ukraine, though several issues remain open questions. Kyiv and Moscow also have yet to make progress on the issue of concessions over land captured by Russia during the conflict.
Sanctions from the US Treasury Department seeking to curtail Russia’s ability to sell its oil internationally are likely to remain in place until a peace agreement is reached. The sanctions are likely keeping several hundred thousand barrels of oil off the market, according to analysts at Goldman Sachs, even as Russia continues to find buyers in China and India willing to take Russian barrels at a steep discount.
At the same time, a monthly decline in output reported by Kazakhstan and escalating rhetoric from Iran’s Ayatollah Ali Khamenei have put upward pressure on prices from the Middle East.
Kazakhstan’s massive Tengiz oilfield, where Chevron (CVX) serves as the lead operator, led a decline of 6% in monthly output in December after attacks by Ukrainian drones damaged a Russian export terminal on the Black Sea, according to Reuters.
Production also fell in the Tengiz field in December, according to Reuters, even as Chevron has spent the year working on a nearly $50 billion effort to increase production in the field by roughly 1 million barrels per day.
Oil is headed for its fifth straight monthly decline as December comes to a close.