U.S. WTI crude prices rose approximately 2% to a weekly high on Thursday, driven by President Trump's warning of "serious consequences" if talks with Russian President Putin on Ukraine fail, alongside market expectations that Federal Reserve rate cuts next month could stimulate oil demand. Central banks use interest rates to control inflation, and rate cuts can reduce borrowing costs for consumers, promoting economic growth and oil demand.
Brent crude contracts rose $1.21, or 1.84%, to close at $66.84 per barrel.
New York Mercantile Exchange September WTI crude contracts gained $1.31, or 2.09%, to close at $63.96 per barrel.
On Tuesday, Brent and WTI closed at their lowest levels since June 5 and June 2 respectively, partly due to pessimistic inventory and supply data released by the U.S. Energy Information Administration and International Energy Agency. Trump stated Thursday that he believes Russia is ready to reach an agreement on ending the Russia-Ukraine conflict, following Putin's proposal of nuclear weapons agreement prospects ahead of the Alaska summit.
However, Trump warned Wednesday that Putin would face "serious consequences" if he rejects the Ukraine peace plan. While not specifying the exact consequences, Trump indicated economic sanctions would be implemented if Friday's talks prove fruitless. As the world's second-largest oil producer in 2024, any agreement to ease sanctions on Russia could potentially increase its crude oil exports.
Trump threatened secondary sanctions on India, a major buyer of Russian oil, if Russia continues the war. Energy consulting firm Rystad Energy noted: "Continued uncertainty over U.S.-Russia talks brings bullish risk premium, as Russian oil buyers may face greater economic pressure." However, some analysts remain skeptical about Trump taking significant actions that would disrupt oil supplies.
Expectations of Federal Reserve rate cuts in September also supported oil prices. Following moderate U.S. consumer price increases in July, traders widely expect rate cuts next month. Treasury Secretary Bessent stated that based on recent weak employment data, an aggressive 50 basis point rate cut cannot be ruled out. However, the Federal Reserve faces a dilemma as July producer prices posted their largest increase in three years, indicating overall inflation is about to rebound.
A Thursday survey by Statistics Norway showed that the country's oil and gas investment is expected to peak this year and decline next year as major projects are completed. Norway's production accounts for approximately 2% of global output and has become Europe's largest pipeline gas supplier since the Russia-Ukraine conflict began in February 2022.
Mexican President Sheinbaum stated Thursday that Carlos Trevino, former CEO of the country's national oil company, was arrested in the United States and will be extradited back to Mexico to face corruption charges.
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