Oil Stalls on Ukrainian War Talks Progress

Brent crude prices fell by 3.32% this week to $67.84 per barrel, with the decline even deeper intraday as prices touched $66.74, the lowest since June 9. The oil market is currently driven by three main narratives: the state of the U.S. economy, decisions from OPEC+, and developments related to the Ukraine conflict.

Last week, Brent surged by 7.6% to $73.55 after U.S. President Donald Trump shortened the deadline for Russia to cease hostilities in Ukraine. The original 50-day window, which was set to expire before September 3, was cut down to August 8. The U.S. announced plans to impose 100% tariffs on China, India, and other countries importing Russian oil if the conflict continued beyond the new deadline, triggering a swift market reaction.

However, attention soon shifted to the Federal Reserve (Fed) after a hawkish press conference by Chair Jerome Powell rattled investor sentiment. Oil prices pulled back by 1.22% to $72.49, and subsequent weak U.S. labour data for July along with a major downward revision to June’s numbers  further dampened demand expectations. Brent dropped another 3.27% to $70.06 as markets reassessed the health of the U.S. economy. The Fed’s decision not to cut interest rates in July now leaves the next policy window in mid-September, raising concerns about a prolonged economic slowdown that could reduce oil consumption.

Over the weekend, OPEC+ added to the bearish tone by announcing a production increase of 547,000 barrels per day starting September 1, effectively reversing the 2.2 million bpd in cuts introduced in 2023. With demand prospects fading and supply set to rise, Brent slipped below the $70.00 mark at the start of the week.

On August 7, U.S. special envoy Stephen Witkoff visited Moscow and met with Russian President Vladimir Putin, delivering a formal proposal for peace talks. President Trump later confirmed the possibility of a summit as early as next week. Both leaders are known for action over rhetoric, and markets interpreted the potential meeting as a real step toward a ceasefire. Meanwhile, the U.S. continues to ramp up pressure through secondary sanctions. India has already been targeted with a tariff increase from 25.0% to 50.0%, set to take effect on August 28, leaving a brief window for diplomatic negotiations that could culminate in a trilateral summit with Ukrainian President Volodymyr Zelenskyy.

Following the news, Brent dropped to $66.75 but did not break below due to strong technical support. That support now sits in the $66.00–$68.00 range, while resistance is expected at $76.00–$78.00. Traders are now focused on whether the proposed Trump-Putin summit will materialise. Russia has yet to confirm the meeting.

Investor flows reflected the cautious mood. Last week, large investors sold $183.7 million in shares of the United States Oil Fund (USO), locking in profits as Brent approached the lower support range. However, this week they have started buying back, with inflows of $84.0 million into USO.

August still presents a technical opportunity for a rebound if Brent holds above the $66.00–$68.00 range. Should that level break, the next downside target lies between $56.00 and $58.00, a scenario more likely to play out in September. Still, further progress toward resolving the Ukraine conflict could accelerate the decline even before then.