Oil markets slipped on Friday as traders awaited a high-stakes meeting between US President Donald Trump and Russian President Vladimir Putin, raising hopes for a potential end to the war in Ukraine that has roiled global energy markets for more than three years.
By 12:06 pm UAE time, Brent crude, the benchmark for two-thirds of the world’s oil, fell 0.60% to $66.44 a barrel, while West Texas Intermediate (WTI), the gauge for US crude, dropped 0.66% to $63.54 a barrel.
Leaders Signal Willingness to Negotiate
The meeting has stirred optimism among investors after both leaders publicly praised each other’s intentions.
“I believe now, he’s convinced that he’s going to make a deal. He’s going to make a deal. I think he’s going to, and we’re going to find out,” Trump said in an interview on Fox News Radio on Thursday.
Putin echoed the sentiment, stating on television, “The US is making, in my opinion, quite energetic and sincere efforts to stop the hostilities, stop the crisis and reach agreements that are of interest to all parties involved in this conflict.”
A ceasefire could reshape oil markets, as an easing of sanctions on Moscow would allow more Russian crude to flow into global markets. Meanwhile, a failure to reach an agreement would continue to constrain supply and support oil prices.
A Market Shaken by War and Sanctions
Since Russia invaded Ukraine in March 2022, oil prices have experienced extreme volatility. Prices surged to $140 a barrel at the onset of the conflict following Western sanctions on Russian crude. However, the global economic slowdown, high inflation, and a weakening Chinese economy later contributed to declining prices.
This week, the International Energy Agency (IEA) updated its forecasts, projecting a rise in global oil supply driven by OPEC production hikes, alongside a reduction in expected demand.
“The latest data show lacklustre demand across the major economies and, with consumer confidence still depressed, a sharp rebound appears remote,” the Paris-based agency said.
Supply is expected to rise by about 370,000 barrels per day (bpd) in 2025 and 620,000 bpd in 2026. Meanwhile, demand growth was revised down to 680,000 bpd for this year. Emerging markets such as China, Brazil, Egypt, and India are consuming less than previously forecast.
Economic Data Adds Pressure
Oil prices also faced downward pressure from economic indicators. The U.S. Producer Price Index (PPI) rose 0.9% in July from the previous month and 3.3% from a year earlier, surpassing expectations. It marked the largest monthly increase since June 2022 and the biggest annual gain since February.
While expectations for Federal Reserve interest rate cuts had strengthened after moderate Consumer Price Index data earlier this week, the higher PPI reading has tempered those expectations. Lower policy rates could eventually boost US economic activity, supporting higher oil demand, but the timing remains uncertain.
Market watchers will closely follow the outcome of the Alaska talks. Progress toward a ceasefire could ease supply concerns and put downward pressure on oil prices, while a deadlock would likely keep prices supported due to restricted Russian output.
