Oil Prices Reluctant to Rebound

Brent crude prices rose by 1.5% to $67.45 per barrel this week. After nearly two weeks of tight sideways trading even such a modest gain stands out, hinting at an attempt to rebound from the $66.00–$68.00 support zone.

The catalyst for this move, however, is far from clear. One possible factor could be the fragile state of peace talks over the war in Ukraine. The situation remains ambiguous, with Moscow yet to officially confirm a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy. U.S. officials, meanwhile, insist that Putin accepted the meeting during a phone call with President Donald Trump, making a denial seem unlikely. Still, even if the meeting takes place, it could end without significant progress. U.S. Vice President J.D. Vance has said Washington has received conditions for a peace deal from both sides and is actively working to bridge their positions, but no date has been set for a summit. News of progress would likely weigh on oil prices, though perhaps not as much as widely assumed, and may not even be enough to break through the $66.00–$68.00 support.

Elsewhere, the other major narratives in the oil market give little reason for bullish optimism. OPEC+ is set to raise production by another 547,000 barrels per day starting September 1, fully unwinding the 2.2 million bpd cuts implemented in 2023. On top of that, the U.S. economy is showing little strength. Labour market data for June and July point to cooling conditions, while fresh business activity figures that will be released on Thursday are expected to confirm ongoing weakness. Manufacturing sector is forecasted to remain in contraction below the 50.0 mark for a second month in a row, while the services PMI, though still in expansion zone, is seen slipping to 54.2 from 55.7.

The only supportive factor for oil prices comes from U.S. oil inventories data. Crude stockpiles fell sharply by 6.01 million barrels last week, far beyond the expected 0.80 million drawdown. This marks the steepest decline in two months and suggests stronger demand, helping prices stabilise. Still, resistance around $68.00 remains a difficult barrier to overcome.

Large investors appear cautious. Last week they sold $43.87 million worth of shares in the United States Oil Fund, and this week they bought back only $29.22 million, which is relatively modest flows that signal uncertainty about Brent’s next move from the $66.00–$68.00 zone. August still holds a technical chance of a rebound from this support. The latest price action could be the early signs of such a move, but for the upside to gather strength, Brent will need to stay above $68.00. Failure to do so would increase the likelihood of a deeper decline toward the $56.00–$58.00 range, especially with September bringing a technically less favourable phase for the oil market.