Oil eases amid uncertainty around Russia-Ukraine peace plan, oversupply worries

By Nicole Jao

NEW YORK, Dec 2 (Reuters) - Oil prices declined 1% on Tuesday as markets weighed faltering Russia-Ukraine peace hopes against fears of oversupply.

Brent crude futures LCOc1 settled 72 cents lower, or 1.14%, at $62.45 a barrel, while U.S. West Texas Intermediate crude CLc1 was down 68 cents, or 1.15%, at $58.64 a barrel.

Both benchmarks advanced more than 1% on Monday.

Investors turned their focus to the Russia-Ukraine peace talks as Russian President Vladimir Putin met with U.S. President Donald Trump's special envoy Steve Witkoff and son-in-law Jared Kushner in the Kremlin on Tuesday.

“Oil prices are in check on expectations for a breakthrough in Ukraine peace talks that could lift restrictions on Russian supplies,” said Clayton Seigle, senior fellow at the Center for Strategic and International Studies. “But those hopes are likely to be dashed, and the market will be facing even more disruption risks as energy remains under fire by both sides.”

MIXED RHETORIC ON RUSSIAN OIL

Just before the meeting, Putin warned European powers that if they started a war with Russia, Moscow was ready to fight. Putin also threatened to sever Ukraine's access to the sea in response to drone attacks on tankers of Russia's "shadow fleet" in the Black Sea.

Putin is set to start a two-day visit to India starting on Thursday, pitching more sales of Russian oil, missile systems and fighter jets in a bid to restore energy and defense ties hit by U.S. pressure on the South Asian nation.

"The mixed rhetoric caused a little shakedown in oil, initially showing confidence that Russia will continue to be a supplier of oil to India," said Phil Flynn, senior analyst with Price Futures Group. However, Putin's comments signalled that the peace deal may not be as close as the market would have hoped, Flynn said.

The latest concerns about oversupply, which put pressure on prices, have been balanced by attacks on Russian infrastructure over the weekend and tensions between the U.S. and Venezuela.

On Monday, the Caspian Pipeline Consortium said it had resumed oil shipments from one mooring point at its Black Sea terminal following a major Ukrainian drone attack on Saturday.

A Russia-flagged tanker loaded with sunflower oil reported a drone attack off the Turkish coast on Tuesday.

Trump said over the weekend that the airspace above and surrounding Venezuela should be considered closed, sparking fresh uncertainty in the oil market, as the South American nation is a major producer.

OPEC+ agreed to leave oil output levels unchanged for the first quarter of 2026 at its meetings on Sunday as the group slows its push to regain market share, amid fears of a looming supply glut.