Oil prices fall on eve of Trump-Putin summit as oversupply concerns grow
2025-08-16 01:34:47
Oil prices fell on Friday as traders focused on the Alaska summit between U.S. President Donald Trump and Russian leader Vladimir Putin, which could lead to an easing of sanctions on Moscow over the Ukraine conflict. Meanwhile, forecasts of an oil market glut also weighed on price sentiment.
For the week, WTI crude was forecast to fall 0.7%, while Brent crude was expected to rise 0.2%. Brent crude LCOc1 fell 38 cents, or 0.6%, to $66.45 a barrel. U.S. West Texas Intermediate crude CLc1 fell 49 cents, or 0.8%, to $63.47 a barrel.
Oil prices have fallen about 10% this year, hurt by the impact of Trump's tariffs and concerns about faster-than-expected output growth from OPEC+. Market participants are increasingly concerned about oversupply and demand uncertainty after the end of the summer.
The Trump-Putin Summit and Geopolitical Risks
A ceasefire in Ukraine was top of the agenda during Trump's meeting with Putin in Alaska on Friday. Trump expressed confidence that Russia was ready to end the war, but he also threatened secondary sanctions against countries purchasing Moscow's oil if peace talks failed to progress. Putin was expected to arrive in Anchorage at 11:00 a.m. local time (3:00 a.m. Beijing time). Kremlin spokesman Dmitry Peskov stated that Russia expected the talks to be fruitful, according to Interfax.
Regarding the potential impact of the summit on oil prices, Dennis Keesler, senior vice president of trading at BOK Financial, said: "If the talks reach an impasse, President Trump may threaten to impose further tariffs on India and even China's oil imports from Russia, which will lead to tensions in crude oil trade." He further added: "If a ceasefire is announced, it will have a negative impact on crude oil prices in the short term."
Trump warned Putin that if he didn't agree to a ceasefire in Ukraine, he would face "very serious consequences," which could include tougher sanctions on Russia and secondary tariffs on countries that buy its oil. Currently, only India has been targeted—with punitive tariffs set to take effect in less than two weeks—but China and Turkey could also come under scrutiny. Investors believe that any changes affecting Russian energy exports could reshape global trade flows.
DNB Carnegie analysts also made their assessment of the direction of the summit and the oil market's reaction: "We believe Putin is willing to make enough concessions to Trump to avoid further oil sanctions in the short term, and may even postpone the announcement of an additional 25% tariff on India's purchases of Russian oil. Any signs of progress on Friday will be interpreted as bearish by the oil market, although the fundamentals remain unchanged."
The market reaction will be apparent when trading opens on Monday.
Chinese economic data and fuel demand concerns
Weak economic data from China has raised concerns about fuel demand. This has weighed on market sentiment despite rising oil production in China, the world's second-largest crude oil user. Refinery runs in China increased 8.9% year-on-year in July, but this was down from June, which was the highest level since September 2023. Despite the increase in exports, China also exported more petroleum products last month than a year earlier, suggesting a decline in domestic fuel demand.
Oversupply forecasts and market sentiment
Forecasts of a growing oil market surplus and the prospect of prolonged high U.S. interest rates are also weighing on market sentiment. Bank of America analysts said Thursday they are expanding their forecast for an oil market surplus, citing rising supply from the OPEC+ producer group, comprising the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other allies. The analysts now forecast an average daily surplus of 890,000 barrels from July 2025 to June 2026.
The International Energy Agency (IEA) predicts that the global oil market will see a larger surplus this year than previously expected, with supply growing at more than three times the rate of demand. The U.S. Energy Information Administration (EIA) has revised upward its supply surplus estimate, now projecting inventories to increase by more than 2 million barrels per day in the fourth quarter of this year and the first quarter of 2026. The Organization of the Petroleum Exporting Countries (OPEC), in turn, has raised its oil demand forecast for next year, painting a more optimistic picture.
This week, concerns about oversupply in the fundamentals have regained focus. U.S. crude oil inventories increased last week due to increased domestic production and imports. According to the latest data from the EIA, commercial crude oil inventories increased by 3 million barrels to 426.7 million barrels in the week ending August 8, while expectations for a decrease of 1 million barrels were met.
At 01:30 Beijing time, WTI crude oil was trading at $63.2 per barrel, down 1.19%, while Brent crude oil was trading at $66.14 per barrel, down 0.99%.
For the week, WTI crude was forecast to fall 0.7%, while Brent crude was expected to rise 0.2%. Brent crude LCOc1 fell 38 cents, or 0.6%, to $66.45 a barrel. U.S. West Texas Intermediate crude CLc1 fell 49 cents, or 0.8%, to $63.47 a barrel.
Oil prices have fallen about 10% this year, hurt by the impact of Trump's tariffs and concerns about faster-than-expected output growth from OPEC+. Market participants are increasingly concerned about oversupply and demand uncertainty after the end of the summer.
The Trump-Putin Summit and Geopolitical Risks
A ceasefire in Ukraine was top of the agenda during Trump's meeting with Putin in Alaska on Friday. Trump expressed confidence that Russia was ready to end the war, but he also threatened secondary sanctions against countries purchasing Moscow's oil if peace talks failed to progress. Putin was expected to arrive in Anchorage at 11:00 a.m. local time (3:00 a.m. Beijing time). Kremlin spokesman Dmitry Peskov stated that Russia expected the talks to be fruitful, according to Interfax.
Regarding the potential impact of the summit on oil prices, Dennis Keesler, senior vice president of trading at BOK Financial, said: "If the talks reach an impasse, President Trump may threaten to impose further tariffs on India and even China's oil imports from Russia, which will lead to tensions in crude oil trade." He further added: "If a ceasefire is announced, it will have a negative impact on crude oil prices in the short term."
Trump warned Putin that if he didn't agree to a ceasefire in Ukraine, he would face "very serious consequences," which could include tougher sanctions on Russia and secondary tariffs on countries that buy its oil. Currently, only India has been targeted—with punitive tariffs set to take effect in less than two weeks—but China and Turkey could also come under scrutiny. Investors believe that any changes affecting Russian energy exports could reshape global trade flows.
DNB Carnegie analysts also made their assessment of the direction of the summit and the oil market's reaction: "We believe Putin is willing to make enough concessions to Trump to avoid further oil sanctions in the short term, and may even postpone the announcement of an additional 25% tariff on India's purchases of Russian oil. Any signs of progress on Friday will be interpreted as bearish by the oil market, although the fundamentals remain unchanged."
The market reaction will be apparent when trading opens on Monday.
Chinese economic data and fuel demand concerns
Weak economic data from China has raised concerns about fuel demand. This has weighed on market sentiment despite rising oil production in China, the world's second-largest crude oil user. Refinery runs in China increased 8.9% year-on-year in July, but this was down from June, which was the highest level since September 2023. Despite the increase in exports, China also exported more petroleum products last month than a year earlier, suggesting a decline in domestic fuel demand.
Oversupply forecasts and market sentiment
Forecasts of a growing oil market surplus and the prospect of prolonged high U.S. interest rates are also weighing on market sentiment. Bank of America analysts said Thursday they are expanding their forecast for an oil market surplus, citing rising supply from the OPEC+ producer group, comprising the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other allies. The analysts now forecast an average daily surplus of 890,000 barrels from July 2025 to June 2026.
The International Energy Agency (IEA) predicts that the global oil market will see a larger surplus this year than previously expected, with supply growing at more than three times the rate of demand. The U.S. Energy Information Administration (EIA) has revised upward its supply surplus estimate, now projecting inventories to increase by more than 2 million barrels per day in the fourth quarter of this year and the first quarter of 2026. The Organization of the Petroleum Exporting Countries (OPEC), in turn, has raised its oil demand forecast for next year, painting a more optimistic picture.
This week, concerns about oversupply in the fundamentals have regained focus. U.S. crude oil inventories increased last week due to increased domestic production and imports. According to the latest data from the EIA, commercial crude oil inventories increased by 3 million barrels to 426.7 million barrels in the week ending August 8, while expectations for a decrease of 1 million barrels were met.
At 01:30 Beijing time, WTI crude oil was trading at $63.2 per barrel, down 1.19%, while Brent crude oil was trading at $66.14 per barrel, down 0.99%.
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