Oil Markets Shake On Ukraine Peace Talks—But Geopolitical Risks Keep Prices From Sliding Further

Crude oil took a hit on Friday, slipping $1.41 to close at $56.94 per barrel (down 2.42%) as traders digested headlines of potential Russia-Ukraine ceasefire negotiations. The weakness came despite it being a thin trading day after Christmas—a sign that the market is genuinely pricing in peace scenario risks.

Peace Talks Inject Uncertainty

The real driver here? Ukraine’s President Zelenskyy confirmed he’s 90% through a 20-point peace proposal and locked in a meeting with Trump at Mar-A-Lago on December 28. Meanwhile, Russia claims talks are progressing at a “slow but steady” pace, though analysts remain skeptical Moscow will budge on territorial demands. If a genuine ceasefire materializes, Russian oil could flood back into global markets—exactly the kind of supply shock crude doesn’t want to see right now.

Supply Side Keeps a Floor Under Prices

What prevented an even steeper decline? Three words: geopolitical supply risk. The U.S.-Venezuela standoff is escalating dangerously. Trump has ordered a total naval blockade, already seized two oil tankers, and ratcheted up military presence in the Caribbean. Last week he announced the U.S. could either hoard that confiscated Venezuelan oil or dump it on the market—signals that underscore Washington’s unpredictability.

In Nigeria, fresh ISIS militants activity forced the U.S. and local forces into joint strikes across Sokoto province, adding another supply concern for West African producers. China, a major Venezuelan oil buyer, has already condemned U.S. moves, raising the specter of broader geopolitical escalation.

U.S. Production Keeps Ticking Up

On the domestic side, Baker Hughes data shows U.S. crude rigs climbed to 409 as of December 23 (up from 406 the prior week), with total rigs at 545 versus 542. That’s still adding incremental supply pressure even as external shocks swirl.

The Fed Wildcard

Don’t sleep on Trump’s recent comments about expecting the next Fed Chair to cut rates to as low as 1%. With the Fed currently sitting at 3.50%-3.75%, aggressive rate cuts could weaken the dollar and theoretically support commodity prices. But that’s a longer-term game.

Bottom line: Oil got sandbagged by peace hopes but found a bid from real geopolitical risks. This isn’t over.