Oil prices fell about 1% on Thursday (13/02/2025) on expectations that a possible peace deal between Ukraine and Russia would end sanctions that have disrupted supply flows, while crude stockpiles in the United States rose.

Brent futures fell 81 cents, or 1.1 per cent, to $74.37 a barrel mid-morning, while US West Texas Intermediate (WTI) crude fell 81 cents, or 1.1 per cent, to $70.56. Brent and WTI were already down more than 2% on Wednesday after US President Donald Trump said Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyi had expressed a desire for peace in separate phone calls with him, and Trump had instructed senior US officials to begin talks on ending the war in Ukraine.

Russia is the world's third-largest oil producer, and sanctions imposed on its crude exports following the invasion of Ukraine nearly three years ago have driven up prices.

How the sanctions play into the price structure

In a note on Thursday, ANZ analysts said oil prices had fallen after news of the possible peace talks on "optimism that risks to crude supplies would ease", pointing to US and EU sanctions pushing down Russian production.

"Signs of tightening supply have driven up oil prices in recent weeks," they said, "and US sanctions against Russian oil companies and vessels have exacerbated the situation."

A build-up of crude oil inventories in the United States, the world's largest crude oil consumer, also weighed on the market. US crude oil inventories rose more than expected last week, as data from the Energy Information Administration (EIA) showed on Wednesday: Crude oil inventories rose by 4.1 million barrels to 427.9 million barrels in the week ending 7 February, the EIA reported - which exceeded the expectations of analysts in a Reuters survey, who had expected an increase of 3 million barrels.

Possible threat of global trade war

This latest downturn in crude oil futures follows a period of consecutive inventory builds, said Darren Lim, commodity strategist at Phillip Nova.

Trump's threat of additional tariffs against US trading partners also weighed on prices amid fears that this could reduce economic growth and therefore oil demand.

Trump announced he would impose reciprocal tariffs on any country that imposes tariffs on US imports, fuelling fears of a widening global trade war.