Oil prices set for weekly gains as Ukraine peace process stalls

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By Georgina McCartney

HOUSTON – (Reuters) -Oil prices steadied on Friday amid uncertainty surrounding a potential peace deal between Russia and Ukraine, with prices remaining on track for their first weekly gain in three weeks.

Brent crude futures were down 3 cents at $67.64 a barrel as of 1:00 p.m. EDT (1700 GMT). West Texas Intermediate (WTI) crude futures gained 5 cents to $63.57.

Both contracts gained more than 1% in the previous session. Brent has risen 2.7% so far this week while WTI is up 1.2%.

“Everyone is waiting for President Trump’s next step,” said UBS commodity analyst Giovanni Staunovo. “Over the coming days, it seems nothing will happen,” he added.

U.S. President Donald Trump said on Friday he will see if Russian President Vladimir Putin and Ukraine President Volodymyr Zelenskiy will work together in ending Russia’s war in Ukraine.

“There is still uncertainty around the potential ceasefire, the negotiations are not going as quick as the market would have hoped,” said Phil Flynn, senior analyst with Price Futures Group.

The three-and-a-half-year war continued unabated this week as Russia launched an air attack on Thursday near Ukraine’s border with the European Union, and Ukraine said it hit a Russian oil refinery and the Unecha oil pumping station, a critical part of Russia’s Europe-bound Druzhba oil pipeline.

Russian oil supplies to Hungary and Slovakia could be suspended for at least five days.

Trump is seeking to arrange a summit between Putin and his Ukrainian counterpart Zelenskiy as part of efforts to broker a peace deal for Ukraine.

Russian Foreign Minister Sergei Lavrov said there is no agenda for a potential summit between Putin and Zelenskiy, accusing Zelenskiy of saying “no to everything”.

The less likely a ceasefire looks, the more likely the risk of tougher U.S. sanctions on Russia, ING analysts said in a client note on Friday.

Meanwhile, U.S. and European planners have presented military options to their national security advisers after the first in-person meeting between the U.S. and Russian leaders since Russia invaded Ukraine.

Estonia is ready to participate in a peacekeeping operation in Ukraine with a force of up to one battalion, the Baltic country’s Prime Minister Kristen Michal said at a press conference with his Finnish counterpart in Tallinn on Friday.

Putin demanded that Ukraine give up all of the eastern Donbas region, renounce NATO ambitions and keep Western troops out of the country, sources told Reuters.

Trump pledged to protect Ukraine under any war-ending deal and Zelenskiy dismissed the idea of withdrawing from internationally recognised Ukrainian land.

LARGER THAN EXPECTED FALL IN US OIL STOCKS

Oil prices were also supported by a larger-than-expected drawdown from U.S. crude stockpiles in the past week, indicating strong demand. 

Stocks fell by 6 million barrels in the week ended August 15, the U.S. Energy Information Administration said on Wednesday. Analysts had expected a draw of 1.8 million barrels. [EIA/S]

Weak economic data from Germany on Friday partially offset the stocks draw, showing that Europe’s largest economy shrank by 0.3% in the second quarter, raising concerns over oil demand.   

Investors were also looking to the Jackson Hole economic conference in Wyoming for signals of a Federal Reserve interest rate cut next month. 

Federal Reserve Chair Jerome Powell on Friday pointed to a possible interest rate cut at the U.S. central bank’s meeting next month but stopped short of committing to it, in remarks acknowledging both the growing risks to the job market and the ongoing threat of higher inflation.

Lower interest rates can stimulate economic growth and increase oil demand, potentially boosting prices.

(Reporting by Georgina McCartney in Houston, Anna Hirtenstein in London; Additional reporting by Sudarshan Varadhan and Ahmad Ghaddar; Editing by David Goodman, Jan Harvey, Franklin Paul and Edmund Klamann)