Oil prices declined by 1.5% on Friday, continuing their downward trajectory for a third consecutive session. The fall comes amid intensified U.S.

efforts to broker a peace agreement between Russia and Ukraine-an initiative that could potentially increase crude supplies in global markets.

Meanwhile, investor appetite for risk has diminished due to uncertainties over the future path of U.S. interest rate cuts.

Brent crude slid by 93 cents to settle at $62.45 per barrel, while West Texas Intermediate (WTI) dropped by 98 cents, closing at $58.02 per barrel.

Weekly Losses Exceed 2.5%

Both Brent and WTI are on track to record weekly losses surpassing 2.5%, erasing most of last week’s gains as concerns over a supply glut weighed heavily on the market.

The overall mood among traders has turned more pessimistic as Washington presses forward with its peace plan for Moscow and Kyiv aimed at ending the three-year conflict.

This comes as new American sanctions against Russian oil giants Rosneft and Lukoil take effect on Friday.

Saxo analysts stated, "Oil extended its losses after Volodymyr Zelensky agreed to consider a U.S.- and Russia-drafted peace plan, while new U.S. sanctions targeting two major Russian oil companies came into force."

Peace Deal Prospects Weigh on Oil Prices

Tony Sycamore, an analyst at IG Markets, noted that Ukraine's lack of an official rejection leaves open-even if slim-the possibility of an agreement, which has put further pressure on oil prices by reducing some geopolitical risk premiums associated with the ongoing conflict.

However, other experts remain skeptical about the likelihood of reaching a deal soon.

In a note to clients, ANZ analysts emphasized that "a breakthrough remains unlikely," pointing out that Kyiv has repeatedly rejected Moscow's demands-a significant obstacle to progress.

The analysts also questioned the potential effectiveness of the new sanctions against Rosneft and Lukoil, adding that Lukoil has until December 13 to divest its extensive international portfolio.

Stronger Dollar Adds Additional Pressure

A strengthening dollar added further pressure on oil prices by making dollar-denominated commodities more expensive for buyers holding other currencies.

The U.S. dollar rallied against Asian currencies after investors reduced expectations for an interest rate cut in December following the release of October meeting minutes from the Federal Reserve that revealed significant divisions among policymakers.

The greenback was poised for its strongest weekly performance in more than a month as traders increasingly bet that a rate reduction next month is less likely.