Oil at 2-Mo Low on Possible Ukraine Concessions to End War

SECAUCUS, NJ (DTN) – Oil futures hit 2-month lows Thursday (12/11) after Ukrainian President Volodymyr Zelensky said he might ask his country to vote on whether to cede its Donbas region to Russia in order to end the war between the two countries.

Zelensky’s remarks followed media reports from Wednesday (12/10) that Ukraine had sent a proposal to U.S. President Donald Trump on territorial concessions it would be prepared to make to Russia.

Energy markets are closely following U.S.-led initiatives to end the near four-year Ukraine conflict, which could pave the way for the removal of sanctions against Russian oil.

The Donbas is Ukraine’s industrial heartland and a key defensive fortress to Ukraine. Russia sees it as part of the old Soviet empire and essential for creating a land bridge with its mainland.

“After days of relatively little progress on the Ukraine peace front, it seems things are moving again, and the oil market is taking note of what this could mean for the sanctions on Russian supply,” said John Kilduff, partner at New York energy hedge fund Again Capital.

Millions of barrels belonging to Russian energy firms Rosneft and Lukoil, now stranded at sea, could add to the global oil glut when the sanctions are lifted, further depressing prices.

NYMEX trading screens showed crude to product futures deepening their losses as Zelensky’s remarks were reported.

The NYMEX WTI futures contract for January delivery settled down $0.86 at $57.60 bbl, after falling to a two month-low of $57.04.

ICE Brent for February shipment slid $0.89 bbl to $61.32 bbl, registering a two-month bottom at $60.79.

Downstream, RBOB futures contract for January delivery slipped $0.0181 to $1.7634 gallon.

ULSD futures for delivery in January dipped $0.0387 to $2.343 gallon.

A modest cut by the International Energy Agency to the oil surplus it had predicted for next year did little for Thursday’s market. The IEA, in its December report, forecasted a global crude overhang of 3.84 million bpd for 2026, versus the 4.09 million bpd it gave a month earlier.

The seizure of a Venezuelan VLCC by U.S. forces on Wednesday has added to the market’s malaise instead. The tanker, carrying approximately 1.1 million bbl – the typical volume of a Suezmax cargo not for a VLCC, which typically carries 2 million bbl  – was on international waters when it was seized by U.S. troops. The Trump administration has sanctioned Venezuelan oil trade after accusing the government of President Nicolas Maduro of multiple transgressions of international laws. U.S. sanctions and supply disruption on Venezuelan, Iranian and Russian oil  typically boosts crude prices.