US-Russia Talks Loom; Oil Prices Fluctuate Amid Ceasefire Stakes

TradingKey - On Monday during the Asian trading session, oil prices initially continued last week's downward trend before recovering slightly in the afternoon. As of the latest update, Brent crude had risen 0.2% to $66.7, and WTI crude was up 0.14% to around $64. The market is closely watching the upcoming US-Russia negotiations, scheduled for August 15.

Last week, oil prices repeatedly declined with increasing signals of US-Russia talks. On August 6, during US market midday trading, WTI crude fell over 2.3% intraday to as low as $63.64, and Brent crude dropped 2.1% to $66.22 after news broke that Trump planned to meet with Putin soon.

On August 8 Eastern Time, Trump announced on his social media platform "Truth Social" that he would meet with Russian President Putin on August 15 to negotiate an end to the Ukraine war, a statement later confirmed by Russia, leading to further declines in crude futures.

Analysts note that the announcement of this meeting has increased market expectations for the end of the Ukraine war and the potential easing of US sanctions on Russian oil. Coupled with the previous OPEC+ easing of oil production limits and tariffs slowing economic activity, which hit oil demand, prices have been dropping.

Nonetheless, it's worth noting that as Trump announced plans to meet Putin, the US is intensifying sanctions against Russia.

According to Trump's threats in July towards Russia, August 8 was the deadline for a ceasefire between Russia and Ukraine. If no ceasefire agreement was reached, the US might impose very severe, approximately 100% tariffs on Russia and secondary sanctions on countries purchasing Russian oil.

Currently, the US is pressuring major Russian oil buyer India, initially imposing a 25% tariff on Indian goods, later announcing an additional 25% on August 6, bringing the total to 50% as a penalty for buying Russian oil. According to Indian media, the new tariff policy could increase the country's oil expenditure by $11 billion.

Analysts suggest that if the US-Russia talks do not result in a peace agreement, sanction pressure could intensify, further impacting oil prices.

Kpler's oil analyst Matt Smith stated that should Trump double tariffs on India, the approximately 1.7 million barrels per day of Russian oil exported to India couldn't be easily redirected elsewhere, forcing Russia to shut down some production capacity, thus reducing global supply and driving oil prices higher.

Sugandha Sachdeva, founder of research firm SS WealthStreet, indicated that if peace talks fail and the conflict persists, the market might quickly turn bullish on crude, potentially leading to a significant rebound in oil prices.

If an agreement is achieved, analysts suggest that a short-term or partial ceasefire between Russia and Ukraine could mainly affect asset classes through short-term sentiment reactions, such as geopolitical premiums on gold, oil, and the dollar. More substantial impacts on major assets would only occur when the US and Russia make tangible progress on sanctions and other issues.