Oil prices remained relatively stable on Friday but are poised to end a two-week losing streak as hopes for an immediate resolution to the Russia-Ukraine conflict fade. The ongoing geopolitical tensions and unexpected U.S. inventory drawdown have provided support to crude oil prices.

Market Performance

Brent crude futures experienced a marginal decline of $0.04, settling at $67.63 per barrel. Similarly, West Texas Intermediate (WTI) crude saw a slight dip of $0.01, closing at $63.51. Despite these minor setbacks, both benchmarks are on track for weekly gains, with Brent up 2.70% and WTI rising 1.10% for the week.

Geopolitical Tensions

The conflict between Russia and Ukraine has intensified, contributing to the upward pressure on oil prices:

• Russia conducted air attacks near Ukraine's border with the European Union
• Ukraine launched a strike on a Russian oil refinery

These developments have diminished prospects for an immediate peace agreement between the two nations.

Peace Negotiations Stall

Peace talks have shown limited progress, with both sides maintaining firm positions:

• Russian President Vladimir Putin demands that Ukraine surrender the Donbas region and renounce NATO membership
• Ukrainian President Volodymyr Zelenskiy has rejected withdrawing from recognized Ukrainian territory

The lack of compromise in negotiations has reduced expectations for a swift resolution to the conflict, potentially supporting oil prices in the near term.

U.S. Crude Inventory Surprise

Oil prices received additional support from unexpected U.S. crude inventory data:

• U.S. crude stockpiles decreased by 6 million barrels
• This significant drawdown far exceeded analysts' expectations of a 1.8 million barrel decline

The substantial reduction in U.S. crude inventories suggests stronger-than-anticipated demand, providing a bullish signal for oil markets.

Economic Outlook

Market participants are closely monitoring the Jackson Hole economic conference for potential signals regarding Federal Reserve interest rate policies. Any indications of future monetary policy could impact the U.S. dollar and, consequently, oil prices.

As geopolitical tensions persist and economic factors remain in focus, oil markets are likely to continue experiencing volatility in the coming weeks. Traders and analysts will be watching closely for any developments that could influence global oil supply and demand dynamics.

Oil prices have found some stability following a report from the American Petroleum Institute (API) indicating a decrease in US crude inventories. The report revealed a drawdown of 2.40 million barrels in the past week, providing some support to oil prices after recent declines.

Market Performance

West Texas Intermediate (WTI), the US crude benchmark, traded near $63.00 per barrel, recovering slightly after a 1.70% drop on Tuesday. Meanwhile, Brent crude, the global benchmark, settled below the $66.00 mark. Despite this recent stabilization, oil prices have experienced a significant downturn, with both benchmarks down more than 10% year-to-date.

Geopolitical Factors

Market participants are closely monitoring the ongoing ceasefire talks between Ukraine and Russia. Any potential peace deal could have significant implications for the oil market, as it might lead to a reduction in restrictions on Russian crude exports. This development could potentially increase global oil supply and put downward pressure on prices.

Long-term Outlook

The longer-term outlook for oil prices remains bearish, influenced by several factors:

1. Expected Supply Glut: Analysts anticipate a potential oversupply situation in 2025, primarily due to production increases from OPEC+ countries.

2. Demand Concerns: There are growing worries about oil demand, particularly in light of potential impacts from trade policies.

Market Sentiment

The recent API report showing a decline in US crude inventories has provided some temporary relief to the oil market. However, this positive data point is set against a backdrop of broader concerns about future supply and demand dynamics.

As the market continues to balance these various factors, oil prices are likely to remain volatile in the near term. Traders and investors will be keenly watching for further developments in geopolitical situations, OPEC+ decisions, and global economic indicators that could influence the direction of oil prices.