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Oil declines on prospects of reduced Russia sanctions after Ukraine talks
AI Summary
- Oil prices fell on prospects of reduced Russia sanctions after talks between Russia, Ukraine, and the United States to end the war, potentially increasing supply in the markets
- Senior energy analyst Suvro Sarkar noted that the chances of escalation or tighter US and European sanctions on Russia have diminished for now, easing geopolitical tensions
- Head of commodity strategy Bart Melek predicts that easing tensions and removing the threat of tariffs or secondary sanctions could drive oil prices down towards an average of $58 a barrel in Q4 2025 and Q1 2026
Oil prices fell on Tuesday as traders assessed the possibility that talks between Russia, Ukraine, and the United States to end the war could lead to lifting sanctions on Russian crude, which may increase supply in the markets.
Brent crude futures fell 48 cents, or 0.72%, to $66.12 a barrel by 08:20 GMT. US West Texas Intermediate crude for September, which expires Wednesday, fell 40 cents or 0.63% to $63.02 a barrel. The more active October contract dropped 46 cents or 0.73% to $62.24 a barrel. Prices had closed about 1% higher in the previous session.
These moves came after a White House meeting on Monday that brought together US President Donald Trump, Ukrainian President Volodymyr Zelensky, and several European allies. Trump said in a social media post that he had spoken with Russian President Vladimir Putin, noting arrangements for a meeting between Putin and Zelensky that could evolve into a trilateral summit.
Suvro Sarkar, senior energy analyst at DBS Bank, said: “Oil prices are reacting mainly to the outcomes of the recent Trump-Putin and Trump-Zelensky meetings. While a peace deal or ceasefire does not appear imminent, some progress has been made.” He added that the chances of escalation or tighter US and European sanctions on Russia have diminished for now.
Sarkar also noted that Trump’s softened stance on secondary sanctions imposed on importers of Russian oil reduced risks of disruptions to global supplies, helping ease geopolitical tensions.
For his part, Zelensky described his talks with Trump as “very good,” pointing to discussions on US security guarantees for Ukraine, which Trump confirmed, though the scope of support remains unclear.
Trump continues to push for a swift end to the deadliest war in Europe in 80 years, while Kyiv and its allies fear the US president may seek to impose a deal with terms favoring Moscow.
Bart Melek, head of commodity strategy at TD Securities, said in a note: “Any outcome that leads to easing tensions and removing the threat of tariffs or secondary sanctions will gradually drive oil prices down toward our target average of $58 a barrel in Q4 2025 and Q1 2026.”
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