Oil prices edged down on Tuesday, extending losses from the 2% drop in the previous session, with markets keeping a close eye on peace talks to end Russia's war in Ukraine and a looming decision on US interest rates.
Brent crude futures were down 8 cents, or 0.1%, to $62.41 a barrel at 0409 GMT. US West Texas Intermediate crude was at $58.75, down 13 cents, or 0.2%.
Both contracts fell by more than $1 a barrel on Monday after Iraq restored production at Lukoil's West Qurna 2 oilfield, one of the world's largest, said Reuters.
"Brent's slip back toward the $62 (is) aligning seamlessly with the broader December narrative," said Phillip Nova's senior market analyst Priyanka Sachdeva. "The noise around potential Iraqi disruptions faded overnight, and the market quickly reverted to its core theme of ample supply and cautious demand expectations."
Ukraine will share a revised peace plan with the US after talks in London between its President Volodymyr Zelenskiy and the leaders of France, Germany and Britain.
"Oil is keeping to a tight trading range until we get a better idea of which way the peace talks will go," KCM Trade chief market analyst Tim Waterer said.
"If the talks break down, we expect oil to move higher, or if progress is made, and there is a likelihood of Russian supply to the global energy market resuming, prices would be expected to drop," he added.
According to sources familiar with the matter, the Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban in a bid to reduce Russia's oil revenue.
Also on the radar is the Federal Reserve's policy decision due on Wednesday, with markets pricing in an 87% probability of a quarter-point rate reduction.
Lower interest rates typically are a positive driver for oil demand given the decrease in borrowing costs, though some analysts were cautious about how much impact this could have on oil prices for now.
"Although markets are largely invested in upcoming FED policy decision on Wednesday for a possible 25bp cut, something that could lend short-term support at the lower end of the $60–65 band, the broader price structure remains anchored by expectations of an oversupplied 2026 (oil market)," said Phillip Nova's Sachdeva.
