Oil Dips As Ukraine Agrees To Peace Deal With Russia; Analysts Debate Outcomes

Meanwhile, Canada may or may not build the first oil pipeline in decades: File Image/Pixabay

In an unexpected turn of events, Ukraine agreeing to the peace deal brokered by Washington between it and Russia caused oil on Tuesday to reverse the gains it achieved in the previous session – which was spurred partly by analytical doubt that the deal would go through.

Brent settled down 89 cents to $62.48 per barrel and West Texas Intermediate also settled down 89 cents to $57.95 per barrel, after it was reported that a revised peace framework gained preliminary acceptance from both Kyiv and Washington; Moscow is reviewing the latest revisions.

However, the deal’s architect, U.S. president Donald Trump, told media he won’t meet with Russian president Vladimir Putin or Ukrainian president Volodymyr Zelenskyy until the agreement is either complete or in its final stage.

Commerzbank analysts noted that if the deal is ratified, it would presumably lead to a lifting of sanctions against Russia and more oil flooding into the world market, thus stoking concerns about global over supply – which Deutsche Bank calculated would be a surplus of at least 2 million barrels per day (bpd) next year regardless of the peace outcome.

However, AMZ stressed that "An accord is far from certain," and "the market is also becoming skeptical that the latest restrictions on Russian oil companies Rosneft and Lukoil will be effective."

Rebecca Babin, senior energy trader at CIBC Private Wealth Group, stated in a note that, "Regardless of whether a deal is ultimately reached, confidence in strict sanctions enforcement is fading.

"As a result, shorts are adding to positions, betting that even without a deal, the rhetoric suggests Trump may be stepping back from actions that would materially impact crude and product flows."

In other oil news on Tuesday, Canada was said to be preparing a memorandum of understanding that would make an exception of federal regulations and green light a new oil pipeline from Alberta to British Columbia on the Pacific coast – the first such pipeline project in a generation.

However, B.C. backed by aboriginal groups were reportedly signalling opposition to the proposal.