Oil prices hold gains on geopolitical uncertainty, Fed rate cut hopes

Investing.com-- Oil prices were largely steady in Asian trading on Monday following sharp weekly gains, supported by fading expectations of an immediate Russia-Ukraine ceasefire and dovish signals from the U.S. Federal Reserve indicating a potential rate cut next month.

As of 21:20 ET (01:20 GMT), Brent Oil Futures expiring in October edged up 0.1% to $67.77 per barrel, while West Texas Intermediate (WTI) crude futures also gained 0.1% to $63.72 per barrel.

Brent futures surged nearly 3% last week, while WTI crude contracts also saw strong gains.

Traders assess geopolitical developments for oil supply outlook

Last week, U.S. President Donald Trump proposed a trilateral summit involving Ukraine and Russia, aiming to facilitate peace talks. 

Ukrainian President Volodymyr Zelenskiy welcomed the initiative, viewing it as a step toward ending the conflict. 

Trump has acknowledged that while Russian President Putin might be "tired" of the war, it remains uncertain whether he desires a resolution.

The prospect of a ceasefire has led to concerns over a global oil supply surplus, especially if U.S. sanctions on Russian oil are eased following a peace agreement. 

However, oil prices remain supported as early optimism over a potential Russia-Ukraine ceasefire continues to wane.

Trump’s additional India tariffs in focus

In trade developments, the U.S. is set to implement an additional 25% penalty tariff on Indian goods starting August 27, bringing the total tariff to 50%. 

This move is in response to India’s increased purchases of Russian oil. Indian officials have expressed frustration over the tariffs, saying India must defend key interests.

Some Indian oil processors have indicated they will continue buying Russian crude, signaling sustained demand that could help underpin global oil prices.

Powell’s rate cut signal supports oil

Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole symposium last week have influenced market expectations. 

Powell indicated that the Fed may need to cut interest rates in September, citing growing risks to the labor market. 

Traders now place an 87% probability on a quarter-point rate cut at the upcoming meeting. 

Lower interest rates reduce borrowing costs for companies and consumers, encouraging investment and spending that can increase energy consumption.