09:02 AM EST, 01/17/2025 (MT Newswires) -- Oil prices fell early on Friday, continuing to retreat from a five-month high touched earlier in the week as geopolitical risks eased.

West Texas Intermediate crude oil for February delivery was last seen down US$0.34 to US$78.34 per barrel, while March Brent oil was down US$0.49 to US$80.80.

The drop comes as traders continue to assess the impact of tightening U.S. sanctions on Russian exports.

Prices rose to the highest since August this week after the outgoing Biden Administration imposed new sanctions on Russian exports, including restrictions on the country's tanker fleet that are likely to cut its exports to China and India, forcing those countries to turn to alternative supply from the Middle East.

"There are reports out today that Chinese and Indian buyers are seeking up to 750 kb/d of additional crude supplies following last week's White House sanctions decision, which is set to disrupt around 1.4 mb/d of Russian seaborne crude exports. However, based on our conversations on the sidelines of the Future Minerals Forum in Riyadh, OPEC seemingly has no appetite to abrogate the collective production agreement and put additional barrels on the market to compensate for a supply shortfall resulting from White House policy," Helima Croft, Head of Global Commodity Strategy and MENA Research at RBC Capital Markets, wrote.

Falling U.S. inventories and higher demand due to frigid winter weather in much of the northern hemisphere are also supporting prices. However geopolitical risk is easing as Israel and the Hamas militant group reached a ceasefire agreement for their war in Gaza, lowering tensions in the region, though it is uncertain if the agreement will convince Yemen's Houthi militants to end their attacks on Red Sea shipping.

"The Israeli Prime Minister is under domestic pressure from the far right to disown the deal until Hamas is utterly obliterated. Without its support, Benjamin Netanyahu would lead a minority government. And even if the truce stands, Houthi rebels are the last bastion of Iranian proxies that Israel will aim to destroy, therefore protracted calm around this crucial trade artery appears doubtful," PVM Oil Associations noted.