Oil prices bounce after losses ahead of U.S.-Russia talks

Investing.com -- Oil prices rose Monday, rebounding to a degree after the prior week’s sharp losses, ahead of upcoming talks between the U.S. and Russia on the Ukraine conflict.

At 08:50 ET (12:50 GMT), Brent oil futures for October gained 0.5% to $66.90 a barrel, while West Texas Intermediate crude futures rose 0.4% to $64.13 a barrel. 

Both contracts slid over 4% last week. 

U.S.-Russia peace talks in focus  

The U.S. and Russia agreed to hold a summit on August 15, with President Donald Trump set to meet Russian counterpart Vladimir Putin to discuss an end to the war in Ukraine. 

The summit comes as Washington ramped up its pressure on Russia’s oil exports, specifically by targeting top buyers China and India. 

Trump imposed as much as 50% tariffs against India to stop it from buying Russian oil, and also threatened a similar move against China. 

"With Russia demanding that Ukraine cede occupied territory to end the war, it’s difficult to see a quick solution," said analysts at ING, in a note. "It’s unlikely that Ukraine will agree to give up its own territory. If we do see some level of de-escalation, it would remove sanction risk from the oil market. This would likely drive prices lower, given the bearish fundamentals."

Trump’s tariff threats had offered limited support to oil prices last week, given that his broader, reciprocal tariffs on major trading partners also took effect. Oil markets feared potential headwinds to demand from U.S. tariffs. 

China inflation underwhelms, U.S. CPI awaited 

Chinese consumer price index inflation read flat for July, while producer price index inflation shrank past expectations, highlighting a sustained deflationary trend in the world’s biggest oil importer.

The print follows a series of middling economic readings from the country, signaling limited support from Beijing’s stimulus measures and an earlier deescalation in a trade war with Washington. 

Extreme weather conditions in July also appeared to have dented Chinese economic activity. 

The focus this week is also on U.S. CPI data for July, with Tuesday’s release set to be studied for any signs of cooling inflation as this would drive up bets on a September interest rate cut by the Federal Reserve.

Speculators reduce Brent net longs 

The latest positioning data showed that speculators are bearish towards the oil market, despite the sanctions and secondary tariff risks.

Speculators reduced their net long in ICE Brent by 20,375 lots over the last reporting week to 240,977 lots as of last Tuesday. This was a move predominantly driven by longs liquidating. 

Additionally, the U.S. oil rig count saw its first weekly increase since April, increasing by one to 411 active rigs last week, according to Baker Hughes (NASDAQ:BKR) data.

"Rig activity has declined significantly in recent months amid price weakness and the bearish market outlook. However, more recent price stability helped to slow the decline in the rig count," said ING.

Ambar Warrick contributed to this article