Oil prices edges higher ahead of Trump-Zelensky meeting

Investing.com -- Oil prices edged higher Monday ahead of a meeting between Ukraine President Volodymyr Zelensky and U.S. President Donald Trump in Washington, as traders attempted to assess the potential implications to global supply.

At 07:45 ET (11:45 GMT), Brent Oil Futures expiring in October gained 0.5% to $66.18 per barrel, while West Texas Intermediate (WTI) crude futures edged 0.7% higher to $62.41 per barrel.

Both contracts fell nearly 1.5% on Friday, and ended with sharp weekly losses before the U.S.-Russia meeting concluded.

Oil looks to Washington

Trump is set to meet Zelensky, along with a number of European leaders, later in the session as they attempt to come to a peace deal to end Europe’s deadliest war in 80 years.

The united front of European leaders will seek to block any outcomes that would undermine Ukraine’s territorial integrity.

This follows a summit between Trump and Russian President Vladimir Putin in Alaska, which failed to result in anything concrete. 

Earlier, Trump had said that a ceasefire would be his “key demand,” even threatening to walk out of talks and impose tougher measures on Moscow. That rhetoric had heightened worries of constrained supply.

"While talks failed to secure a ceasefire, the tone and the absence of ’severe consequences’ for the lack of a truce, reduce, or at least delay, the risks of stricter sanctions," ING analysts said in a note.

That said, White House trade adviser Peter Navarro stated Monday that India’s purchases of Russian crude were funding Moscow’s war in Ukraine and had to stop.

Navarro’s comments around India’s purchases of Russian crude revived concerns about supply flows.

"India acts as a global clearinghouse for Russian oil, converting embargoed crude into high-value exports while giving Moscow the dollars it needs," Navarro said.

China and India remain the top buyers of Russian crude. Trump has imposed an additional 25% duty on Indian goods, effective August 27, citing its purchase of Russian oil.

"Ultimately, Russia still wants Ukraine to cede territory, something Ukraine will be very hesitant to do, particularly without very strong security guarantees from the US and Europe," ING analysts said.

"Ultimately, the reduced risk of tougher sanctions and secondary tariffs should allow bearish oil fundamentals to become the dominant driver for oil prices moving forward," they added.

Jackson Hole in spolight

Away from geopolitical concerns, investors are also watching for clues from Federal Reserve Chairman Jerome Powell’s comments at this week’s Jackson Hole meeting regarding the path of U.S. interest rate cuts.

The U.S. central bank is widely expected to cut interest rates by 25 basis points at its next meeting in September, but a hotter-than-expected producer prices release last week has virtually ruled out the possibility of a hefty 50 bps reduction.

Lower interest rates tend to boost economic activity, increasing the demand for energy.   

Ayushman Ojha contributed to this article