Looming Trump/Putin Talks, Possible Rate Cut Boost Oil By 2%

But the prospect of a Fed cut is speculative at best: File Image/Pixabay

With the peace talks between U.S. president Donald Trump and Russian president Vladimir Putin less than a day away, a cautious sense of optimism infused oil trading on Thursday, helped along by expectations that the U.S. Federal Reserve would enact another rate cut next month.

Brent settled up $1.21, or 1.8 percent, at $66.84 per barrel, while West Texas Intermediate settled up $1.31, or 2.1 percent, at $63.96.

Rate cut hopes were derived from U.S. treasury secretary Scott Bessent saying that given recent weak employment numbers, he thought an aggressive half-percentage-point cut was possible; however, the Fed is reportedly concerned that rising inflation remains a risk and pointed to American consumer prices increasing moderately in July.

While Friday's Trump/Putin meeting has been greeted with mixed sentiment, traders were said to be swayed to a degree by Trump on Thursday stating that he believed Putin was ready to make a deal, as well as his threat of "severe consequences" if Putin fails to agree to peace with Ukraine.

Rystad Energy wrote in a note, "The uncertainty of U.S.-Russia peace talks continues to add a bullish risk premium given Russian oil buyers could face more economic pressure."

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, added, "Consensus is that we won't see a definitive ceasefire or aggressive sanctions from Trump."

Despite Thursday's gains, Bloomberg pointed out that "On the supply side, the picture is increasing bearish; oil has lost more than 10 percent this year as the Organization of the Petroleum Exporting Countries and its partners complete the reversal of output curbs started in 2023."

RBC analysts noted that supplies are "primed to back up in the Atlantic Basin" and that "crude oil balances for the rest of the year are weaker" than in 2024.

In other oil news on Thursday, while the biggest Indian state-owned refiners have halted spot purchases of Russian crude in order to avoid U.S. sanctions, sources familiar with the matter told media they have begun to inquire traders about potential purchases of the flagship Russian crude Urals.

The reason is that discounts for spot Urals supply have widened to about $2.70 per barrel from $1-$1.50 per barrel at the end of July, and one source remarked, "We will wait for the outcome of Trump-Putin talks that will give us some indications."