Oil prices edged down on Friday after reaching a one-week high earlier in the session, after U.S. President Donald Trump warned Russia of “consequences” if it did not reach a Ukraine peace deal. Strong economic data out of Japan, which is among the largest global crude importers, had also lifted market sentiment.
As of 4:59 GMT, Brent crude futures fell 17 cents, or 0.25 percent, to $66.67 a barrel. Meanwhile, U.S. West Texas Intermediate crude futures were down 21 cents, or 0.33 percent, to $63.75.
Trump-Putin meeting in focus
Market attention is focused on Friday’s meeting between Trump and Russian President Vladimir Putin in Alaska, where securing a ceasefire with Ukraine will be the main agenda item. Ongoing conflict between Russia and Ukraine has been supporting oil prices by constraining Russian supply. However, Trump has said he believes Moscow is ready to bring the war to an end.
In 2024, Russia ranked as the world’s second-largest crude producer after the United States, meaning any deal that eases sanctions on Moscow could significantly increase its oil exports to global markets.
Trump has warned he may impose secondary tariffs on major buyers of Russian crude, particularly China and India, if the war in Ukraine persists.
Uncertainty surrounding U.S.-Russia peace talks continues to add a bullish risk premium to oil markets, as buyers of Russian crude could face increased economic pressure. However, some analysts remain doubtful that Trump would take steps likely to cause major disruptions to global oil supplies.
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Higher-than-expected inflation figures fuel rate cut concerns
Fresh Japanese government data on Friday showed the economy grew at an annualized rate of 1 percent in the April–June quarter, beating the median forecast of 0.4 percent growth. On a quarterly basis, GDP rose 0.3 percent, compared with expectations for a 0.1 percent gain. Stronger economic activity generally boosts oil demand.
However, expectations that U.S. interest rates may stay elevated for longer capped oil prices’ gains. Higher-than-expected inflation figures and soft U.S. jobs data have fueled concerns that the Federal Reserve will maintain high rates, a factor that typically weighs on oil demand.
Oil prices rose about 2 percent to a one-week high on Thursday after Trump’s warning. Prices were also supported by optimism that an expected U.S. interest rate cut next month could boost oil demand.
Central banks, including the U.S. Federal Reserve, adjust interest rates to manage inflation. Cutting rates lowers borrowing costs for consumers, which can stimulate economic growth and, in turn, increase demand for oil.
