On Monday (December 8), oil prices showed a significant downward trend during the European trading session, falling sharply from the high of over $60 last Friday. The price had dropped to $59.43 during the session, a decrease of about 1.07%. Oil prices remained low before the US market opened.



Investors are closely watching the progress of multilateral negotiations aimed at ending the conflict in Ukraine – markets are concerned that a breakthrough in such negotiations could ease US restrictions on Russian oil, allowing more than 2 million barrels of Russian oil per day to flow back into the market and significantly suppress oil prices.

Fundamental factors also failed to provide effective support for oil prices. The market is closely watching the slow-moving peace talks in Ukraine, with the core logic being clear: any ceasefire agreement or breakthrough in negotiations could prompt Russia to release more crude oil production capacity. Traders don't need to wait for a formal agreement to be signed—related rumors are enough to cool market risk appetite.

Progress of Ukraine negotiations

Peace talks in Ukraine continue to progress slowly, with disputes over security guarantees in Kyiv and the status of Russian-occupied territories remaining unresolved. US and Russian officials also disagree on the peace plan proposed by the Trump administration, and Ukrainian President Zelensky will meet with European leaders in London on Monday, with the US peace proposal serving as a significant backdrop to the talks.

PVM oil market analyst Tamas Varga stated clearly: "If any agreement is reached on the Ukraine issue in the near future, Russian oil exports should increase, thus putting downward pressure on oil prices."

ANZ analysts further warned in a client report: "The various potential outcomes of Trump's latest push to end the war could cause oil supply to fluctuate by more than 2 million barrels per day."

Commonwealth Bank of Australia analyst Vivek Dhar outlined the core bullish and bearish risks to the oil price outlook: a ceasefire is the main downside risk, while continued disruption of Russian oil infrastructure is a significant upside risk. Dhar emphasized in his report: "We believe concerns about oversupply will eventually materialize, especially as the flow of Russian oil and refined products eventually circumvents existing sanctions, which will push futures prices closer to $60 per barrel by 2026."

Federal Reserve interest rate cut expectations

The market widely expects the Federal Reserve to implement a 25 basis point interest rate cut this week, with an implied probability of approximately 84% in pricing. Generally, loose monetary policy supports risk assets such as crude oil, but there are internal disagreements at this policy meeting, and traders are cautious about the smoothness of the policy path. In other words, while lower interest rates may bring some benefits, they are insufficient to offset supply-side uncertainties.

Analysts warn that the Trump administration's policy moves toward Ukraine could cause global crude oil supply to fluctuate by more than 2 million barrels per day—a wide range that makes the market reluctant to price aggressively.

Supply-side variables

Besides the situation in Ukraine, factors such as potential new restrictions on Russian exports by the G7 and the EU, US pressure on Venezuela, and the quiet increase in Iranian crude oil imports by Chinese refineries have further complicated the supply-side landscape. The market currently lacks clear directional guidance, and traders are closely assessing the impact of various potential variables. The market has neither seen a surge in buying nor a panic sell-off, exhibiting an overall wait-and-see attitude.

The G7 and the EU may be taking new steps to sanction Russian oil. According to sources familiar with the matter who spoke to Reuters, the G7 and the EU are discussing replacing the price cap on Russian oil exports with a complete ban on maritime services. This move could further restrict the oil supply from the world's second-largest oil producer—making it more difficult for Russian crude to enter the international market and forcing it to rely entirely on informal shipping channels. This could lead to a significant reduction in global crude oil supply, undoubtedly supporting oil prices.

Another factor is the increased pressure from the United States on Venezuela. As a member of the Organization of the Petroleum Exporting Countries (OPEC), Venezuela has recently faced multiple pressures from the United States, including attacks on ships allegedly attempting to smuggle drugs and discussions about military action to overthrow President Nicolás Maduro. These developments could impact Venezuela's oil export capacity.

Finally, China's import dynamics have eased the pressure of oversupply. Trade sources and analysts say that China's independent refiners have used newly issued import quotas to increase their purchases of sanctioned Iranian oil from onshore storage tanks, which has alleviated the global crude oil oversupply situation to some extent.

Technical Analysis: Strong resistance levels above are putting upward pressure on prices.

From a technical perspective, bulls face multiple resistance levels: the 200-day moving average forms a key resistance around $63.54, while last Friday's high of $60.50 and the 50-day moving average at $59.75 form a dense resistance zone, creating a strong upward barrier. With price momentum turning downwards, traders are again focusing on the $59.23-$58.44 short-term pullback range, which may become the next support area. The current market pattern exhibits a clearer seller's path, and price action has reflected this technical weakness.

With resistance from major moving averages and downward price momentum, the path of least resistance in the crude oil market is biased towards the bears. If sellers continue to exert pressure, the $59.23-$58.44 pullback range will become a key area for bargain hunters. Unless this support level holds and positive news emerges, the short-term bearish market sentiment is unlikely to reverse.