- The US president will meet Russian president Putin on Friday to discuss an end to the war in Ukraine.
- Oil has found support in recent days from optimism over Fed rate cuts.
- Data revealed that US crude inventories increased by 3 million barrels.
Oil prices held steady on Thursday as market participants looked forward to the meeting between Trump and Putin in Alaska. At the same time, a surge in Fed rate cut bets has boosted optimism about a stronger economy and robust oil demand. However, there is downward pressure from weak demand and prospects of increased oil supply.
WTI futures (Source: NYMEX)
The US president will meet Russian president Putin on Friday to discuss an end to the war in Ukraine. Trump has threatened severe consequences for Russia if it fails to end the war soon. These include more sanctions and secondary tariffs on countries that consume Russian oil.
Such an outcome would tighten oil supply from Russia and boost oil prices. However, some analysts don’t believe Trump would make such a move, as higher oil prices would hurt the US economy.
“The uncertainty of US-Russia peace talks continues to add a bullish risk premium given Russian oil buyers could face more economic pressure,” Rystad Energy said in a client note.
“How the Ukraine-Russia crisis resolves and Russia’s flows change could bring some unexpected surprises.”
Meanwhile, oil has found support in recent days from optimism over Fed rate cuts. Data on the US labor market and inflation have pointed to softness, increasing pressure on the Fed to cut interest rates. Figures on Tuesday showed that the US CPI increased by 0.2% as expected. Meanwhile, the annual figure came in below estimates at 2.7%.
After the report, market participants were almost fully pricing a rate cut in September. Moreover, Treasury Secretary Scott Bessent was calling for a 50-bps move to make up for delays. Oil thrives when interest rates are low because the economy grows faster and demand for the commodity jumps.
However, oil also faced headwinds after data revealed that US crude inventories increased by 3 million barrels. This was a surprise, as economists had expected a 275,000 barrel drop. It indicated a decline in demand in the US last week.
Elsewhere, the IEA raised its forecast for oil supply growth, citing increased output from OPEC+ members. However, the agency also noted that additional sanctions on Russia and Ukraine would curb oil supply.
