 "The photograph shows the Permian Basin oil field near Odessa Representational image/Reuters")
Crude oil prices have fallen to a two-month low, registering a 4 per cent weekly drop, amid expectations that Presidents Donald Trump and Vladimir Putin could reach a deal regarding the war in Ukraine in their upcoming summit in Alaska.
Trump will meet Putin on Friday in Alaska and the war in Ukraine will top the agenda. Ahead of the meeting, reports have emerged that Trump has drafted proposals that could hand over the control of eastern Ukraine to Russia. Formally, he has said that there will be a land swap as part of a deal to end of the war.
Even as Ukrainian President Volodymyr Zelenskyy has rejected any surrender of territory to Russia , traders appear to be hopeful that some deal would be reached that would improve the global oil supply and ease prices.
Brent traded near $66 a barrel after falling 4.4 per cent last week and West Texas Intermediate was above $63, according to Bloomberg.
However, that could fall further if Trump and Putin reach a deal about a war in Ukraine that leads to the lifting of sanctions on Russian oil.
Crafting an agreement is going to be extremely difficult, but assuming the situation gets resolves, the path for Brent is down below $65 with risks we may see prices below $60 late in the fourth quarter of the year, Robert Rennie, the head of commodity and carbon research at Westpac Banking Corp, told Bloomberg.
How could Trump-Putin deal affect oil prices?
In case Trump and Putin reach a deal that would lift sanctions on Russian oil, global supply would increase that would ease prices.
Separately, oil-producing cartel OPEC+ is also expected to raise production, reversing previous cuts in output that had reduced the global supply and raised prices. Any increase in production, along with any increase in the supply of Russian oil, are bound to ease prices.
Impact Shorts
More ShortsMoreover, Trump’s tariffs have threatened to slow economic growth the world over, particularly in India on which he has slapped 50 per cent tariffs. Slower economic growth would mean reduced demand for oil, which would further work towards reducing prices.
However, if Trump’s efforts to reach a deal falter and the war drags on, “the market could quickly pivot to a bullish stance, potentially triggering a sharp rally in oil prices”, Sugandha Sachdeva, the founder of SS WealthStreet, told Reuters.
“The near-term direction will hinge on several key events, including the August 15 meeting between the US and Russian presidents, upcoming speeches from Federal Reserve officials, and the release of the US CPI data,” Sachdeva further said.