Oil Prices Dip as Ukraine Peace Talks Progress Raise Hopes for Conflict Resolution

Oil prices dropped Monday as peace talks between Russia and Ukraine showed signs of progress and the U.S. dollar strengthened to its highest level in months. Brent crude fell to $62.42 per barrel while West Texas Intermediate dropped to $57.91, continuing last week's losses as markets react to potential diplomatic breakthroughs and currency shifts.

Brent crude futures declined 14 cents, or 0.22%, to $62.42 per barrel by 0148 GMT. West Texas Intermediate crude dropped 15 cents, or 0.26%, to $57.91 per barrel. Both benchmarks extended losses from the previous week as investors weighed the possibility of reduced geopolitical tensions.

The dollar headed for its biggest weekly gain in six weeks, with the dollar index reaching its highest levels since late May. A stronger dollar makes oil more expensive for buyers using other currencies, which typically pressures crude prices downward.

Here's what this means for markets: Peace talks gaining momentum between Russia and Ukraine could ease supply concerns that have supported oil prices in recent months. Russia is a major oil producer, and any conflict resolution might reduce the risk premium built into crude prices.

The timing matters too. Oil markets are already dealing with demand concerns as central banks worldwide raise interest rates to fight inflation. A stronger dollar adds another layer of pressure by making commodities more expensive for international buyers.

For traders, this creates a complex picture. Geopolitical risks that once pushed prices higher are potentially diminishing, while currency headwinds add downward pressure. The combination suggests oil markets may face continued volatility as these competing forces play out.