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Oil prices rose modestly on Thursday as investors weigh geopolitical risks ahead of the U.S.-Russia summit on Ukraine, scheduled for Friday, while a softer market outlook limited gains.
Brent crude futures increased 24 cents, or 0.37%, to $65.87 a barrel at 0356 GMT, while U.S. West Texas Intermediate (WTI) futures rose 21 cents, or 0.34%, to $62.85. Both contracts had touched two-month lows on Wednesday following bearish supply forecasts from the U.S. government and the International Energy Agency (IEA).
Geopolitical Tensions Support Prices
Uncertainty surrounding the outcome of U.S.-Russia peace talks continues to underpin a bullish risk premium. President Donald Trump warned of “severe consequences” if Russian President Vladimir Putin fails to agree to a ceasefire in Ukraine, including possible secondary tariffs on major Russian crude buyers such as China and India.
“The uncertainty of U.S.-Russia peace talks continues to add a bullish risk premium given Russian oil buyers could face more economic pressure,” said Rystad Energy. ING’s Warren Patterson added, “Clearly there’s upside risk for the market if little progress is made on a ceasefire.”
However, the expected oil surplus later this year and into 2026, alongside OPEC’s spare capacity, suggests that secondary tariffs on key buyers could be manageable, though additional sanctions on other major importers like China and Turkey could complicate the supply picture.
U.S. Monetary Policy Provides Support
Expectations for a Federal Reserve rate cut in September are also lending support to oil. U.S. inflation data for July showed moderate increases, with market participants nearly certain (99.9% probability) that a rate reduction will occur at the Fed’s September 16-17 meeting. Treasury Secretary Scott Bessent suggested that an aggressive half-point cut is possible given recent weak U.S. employment figures. Lower interest rates would encourage economic activity, boosting oil demand.
Market Headwinds
Oil gains remain constrained by rising U.S. crude inventories, which unexpectedly increased by 3 million barrels in the week ending August 8, according to the Energy Information Administration (EIA). Additionally, the IEA forecasted faster-than-expected global supply growth in 2025-2026, driven by OPEC+ output increases and rising production from non-OPEC sources.
Overall, oil markets are navigating a mix of geopolitical risk, expected monetary easing, and supply pressures, creating a cautiously bullish backdrop with limited upside.
