Oil Prices Drop Amid Russia-Ukraine Tensions and Oversupply Fears

By Nicole Jao

NEW YORK, Dec 2 (Reuters) - Oil prices eased on Tuesday as markets weighed faltering Russia-Ukraine peace hopes against fears of oversupply.

Brent crude futures fell 25 cents, or 0.4%, to $62.92 a barrel by 11:38 a.m. ET (1638 GMT). U.S. West Texas Intermediate crude was down 24 cents, or 0.4%, to $59.08 a barrel.

Both benchmarks advanced more than 1% on Monday.

Russian President Vladimir Putin on Tuesday warned European powers that if they started a war with Russia, Moscow was ready to fight. Putin also threatened to sever Ukraine's access to the sea in response to drone attacks on tankers of Russia's "shadow fleet" in the Black Sea.

MIXED RHETORIC ON RUSSIAN OIL

Putin is set to start a two-day visit to India starting on Thursday, pitching more sales of Russian oil, missile systems and fighter jets in a bid to restore energy and defence ties hit by U.S. pressure on the South Asian nation.

"The mixed rhetoric caused a little shakedown in oil, initially showing confidence that Russia will continue to be a supplier of oil to India," said Phil Flynn, senior analyst with Price Futures Group. However, Putin's comments signalled that the peace deal may not be as close as the market would have hoped, Flynn said.

Trump's special envoy, Steve Witkoff, and son-in-law Jared Kushner will meet Putin on Tuesday for talks on a possible way to end the war.

"The latest goings-on in the oversupplied global picture putting pressure on prices have been balanced by hits on Russian infrastructure that accelerated through the weekend, as well as bubbling tensions between U.S.-Venezuela," said Rystad analyst Janiv Shah.

On Monday, the Caspian Pipeline Consortium said it had resumed oil shipments from one mooring point at its Black Sea terminal following a major Ukrainian drone attack on Saturday.

Another Russian-flagged tanker loaded with sunflower oil reported a drone attack off the Turkish coast on Tuesday.

U.S. President Donald Trump said on Saturday, "the airspace above and surrounding Venezuela" should be considered closed, sparking fresh uncertainty in the oil market, as the South American nation is a major producer.

Prices continued to be under pressure due to concerns about a potential oversupply in the coming months, as OPEC+ members increased production. 

Against this backdrop, OPEC+ agreed to leave oil output levels unchanged for the first quarter of 2026 at its meetings on Sunday as the group slows down its push to regain market share amid fears of a looming supply glut.

(Reporting by Nicole Jao in New York, Seher Dareen and Enes Tunagur in London, Ashitha Shivaprasad in Bengaluru and Trixie Yap in Singapore; Editing by Kate Mayberry, Sharon Singleton, Rod Nickel)