Oil prices just took a hit as Ukraine-Russia peace talks heat up. WTI crude dropped 1.59% Friday, gasoline fell 1.62%—both hitting 4-week lows. The stronger dollar didn't help either.

Here's the twist: While peace hopes pushed prices down, the actual deal fell apart when Ukraine and EU allies rejected key terms. Result? Oil recovered from its worst levels.

The bigger picture is messy. OPEC flipped its Q3 outlook from a 400k bpd deficit to a 500k bpd surplus (US production is crushing it). But Russia's crude exports are getting hammered—down to 1.7M bpd (3-year low) after Ukraine's drone strikes took out 13-20% of refining capacity. New US-EU sanctions are making it worse.

Meanwhile, geopolitical risk is everywhere: Iran seized a tanker, the US is flexing near Venezuela (the world's 12th-largest producer), and IEA's forecasting a record 4M bpd global oil glut in 2026. OPEC+ is hitting pause on production hikes next quarter because of the surplus.

The bottom line? Peace deal hopes = bearish for oil. But supply chaos in Russia + broader geopolitical tensions = some underlying support. Classic oil market tug-of-war.