Oil prices have retreated from their second consecutive weekly gain following a statement by President Trump suggesting that the Ukraine war could be resolved if oil prices were to decline. This move appears to be aimed at pressuring Russia by reducing its petrodollar funding.

Market Movements

Brent crude, the global oil benchmark, traded above $67.00 per barrel after experiencing a 0.80% drop in the previous session. Meanwhile, West Texas Intermediate (WTI), the U.S. oil benchmark, remained below $64.00 per barrel.

Despite the recent pullback, oil futures have managed to maintain weekly gains of 0.70%. However, prices have been largely range-bound since early August, caught between conflicting geopolitical risks and bearish market fundamentals.

Trump's Stance and Global Implications

President Trump renewed his calls for countries to cease purchasing oil from Russia, further emphasizing the geopolitical tensions surrounding the energy market. His upcoming scheduled call with Chinese President Xi Jinping is being closely watched by market participants for any developments that could impact trade tensions.

Supply and Demand Dynamics

The International Energy Agency (IEA) has projected a record surplus in oil supply for the coming year. This forecast is attributed to faster-than-expected output increases by OPEC+ countries, potentially putting downward pressure on prices.

Geopolitical Factors

The ongoing conflict in Ukraine continues to influence the oil market. Ukraine has intensified its attacks on Russian oil refineries, leading to a significant drop in Russian refining runs. Current figures show Russian refining has fallen below 5 million barrels daily, marking the lowest level since April 2022.

Market Outlook

As geopolitical tensions persist and supply-demand dynamics evolve, the oil market remains in a delicate balance. Traders and analysts will be closely monitoring developments in Ukraine, potential changes in OPEC+ production strategies, and global economic indicators that could influence oil demand in the coming months.

The interplay between political statements, military actions, and market fundamentals continues to create a complex environment for oil prices, leaving market participants to navigate uncertain waters in the near term.

Oil prices remained relatively stable following the Federal Reserve's recent decision to cut interest rates, as conflicting signals about oil demand emerged in the market.

Federal Reserve's Rate Cut Impact

The Federal Reserve implemented a quarter-point interest rate cut, a move that typically stimulates oil demand by lowering borrowing costs. Despite this, the impact on oil prices was minimal. Brent crude experienced a slight decline of 0.12%, settling at $67.87 per barrel, while West Texas Intermediate (WTI) saw a marginal drop of 0.16%, closing at $63.95.

The Fed's indication of potential additional rate cuts through the end of the year would normally be expected to boost oil demand. However, the market's muted response suggests other factors are at play.

U.S. Inventory Data: A Mixed Picture

Recent U.S. crude inventory data presented a complex picture:

• Crude Stockpiles: A sharp decline was observed, influenced by record-low imports and near two-year high exports.
• Distillate Inventories: These rose by 4.00 million barrels, significantly exceeding the anticipated increase of 1.00 million barrels.

The substantial rise in distillate inventories has raised concerns about demand in the United States, the world's largest oil consumer.

Global Oil Demand Trends

Despite mixed signals, global oil demand has shown growth:

These figures are approaching JP Morgan's projection of 0.83 million barrels per day growth, indicating a generally positive trend in global oil consumption.

Market Outlook

The oil market appears to be in a state of equilibrium, balancing various factors:

1. Monetary Policy: The Fed's rate cut and potential future cuts could stimulate demand.
2. Supply Dynamics: Sharp declines in U.S. crude stockpiles suggest tightening supply.
3. Demand Concerns: The unexpected rise in distillate inventories hints at potential weakness in U.S. oil demand.
4. Global Growth: Despite challenges, global oil demand continues to show year-over-year growth.

As these factors continue to evolve, market participants will closely monitor further economic indicators, geopolitical developments, and supply-demand dynamics that could influence oil prices in the coming weeks.