Morning Highlights: Failed Moscow Talks Keep Russian Supply Off Market

Wednesday, December 3, 2025

MARKET SNAPSHOT

Oil rallied over 1% as hopes for near-term sanctions relief faded. Brent crude climbed $0.85 (1.3%) to $63.30/bbl, while WTI gained $0.85 (1.5%) to $59.49/bbl as of 5:55 AM EST. Both benchmarks reversed Tuesday's 1%+ losses.

Key Driver: Failed U.S.-Russia peace talks in Moscow eliminated prospects for quick removal of sanctions on Russian oil companies, keeping supply constraints in play longer than some traders anticipated.

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TOP DEVELOPMENTS

1. Moscow Talks Break Down—No Sanctions Relief in Sight

Five hours of meetings between Putin and Trump's top envoys (Witkoff and Kushner) ended Wednesday without compromise on a Ukraine peace deal. Russia blamed the impasse on what Putin called "absolutely unacceptable" proposals pushed by European powers.

Market Impact: Goldman Sachs notes that "oil markets and prediction markets do not appear to price a large probability of a near-term peace agreement and removal of sanctions on Russian oil." Sanctions on Rosneft and Lukoil remain firmly in place, keeping restricted supply off the market.

2. Russia Threatens Retaliation on Western Tankers

Putin announced Russia will "take measures" against tankers from countries helping Ukraine, after Ukrainian forces hit two sanctioned Russian oil tankers in the Black Sea last week. Combined with ongoing drone strikes on Russian export terminals, geopolitical risk premiums are climbing.

Implication: Shipping insurance costs and route security concerns could tighten effective supply even without physical disruptions.

3. EU Locks in Russian Energy Exit Timeline

In a major policy shift finalized early Wednesday, the EU agreed to permanently end Russian gas and oil imports:

• LNG: Phase-out by end of 2026

• Pipeline gas: Phase-out by September 2027

• Oil: Legislative proposal coming early 2025 targeting end-2027 exit

Russia currently supplies 12% of EU gas (down from 45% pre-invasion). Hungary, France, and Belgium are among remaining buyers. EU members must submit diversification plans by March 1, 2025.

This formalizes Europe's energy divorce from Russia, adding long-term structural shifts to the supply-demand equation.

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BEARISH PRESSURE: U.S. INVENTORY BUILD

API reported Tuesday that U.S. stockpiles rose across the board last week:

• Crude: +2.48M barrels

• Gasoline: +3.14M barrels

• Distillates: +2.88M barrels

Official EIA data releases later today.

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BOTTOM LINE

Failed diplomacy has extended the timeline for Russian sanctions relief, supporting prices in the near term. However, domestic inventory builds and persistent oversupply forecasts for 2026 continue to limit upside. Watch today's EIA numbers for confirmation of the API build-a larger-than-expected increase could pull prices back. The EU's formal exit plan adds another layer to the long-term reconfiguration of global energy flows.