"Skeptical sentiment": what does the oil market expect from Trump and Putin's Alaska summit?

The outcome of the meeting between the US and Russian presidents on the war in Ukraine may affect the US sanctions policy and Russian oil supplies. Analysts put several scenarios in their forecasts for the summit, which will be held on August 15: a deal, escalation or status quo. Some say that if the talks are successful, Trump will soften sanctions against Russia and oil prices will fall, while others consider such a scenario unlikely. Experts also say that in case of failure, sanctions will be tightened and oil prices will rise, but some emphasize that high oil prices are a blow to the Trump administration and Moscow understands this perfectly well.

The outcome of the summit in Alaska may lead to tangible fluctuations in the oil market, MarketWatch writes. If the U.S. and Russia announce a "constructive agreement" with a partial lifting of sanctions on Russian oil exports, prices could fall as the market will expect an increase in global supply, Capital.com senior analyst Daniela Sabin Hathorn believes.

"If the negotiations break down or escalate into new sanctions - such as export restrictions or additional measures against countries that trade with Ma (such as India) - we will see a sharp rise in oil prices," Hathorn added.

The uncertainty surrounding the negotiations so far continues to support a bullish risk premium, Norwegian consultancy Rystad Energy notes. "How the Ukraine-Russia crisis will be resolved and how [oil] flows from Russia will change could bring unexpected surprises," Reuters quotes its analysts as saying.

Goldman Sachs described three possible scenarios for the outcome of the summit:

- deal: in case of a peace agreement, the US may ease sanctions, but analysts do not expect a noticeable increase in Russian oil supplies in the near future - this will be hindered by OPEC+ quotas, insufficient investment in production and a strong ruble.

- escalation: if attempts to negotiate a ceasefire in Ukraine fail, Trump could impose new or secondary sanctions, but Goldman Sachs analysts do not expect major disruptions in exports. Russia is likely to sell oil at deep discounts, while China and India will continue buying, they add.

- status quo: if the status quo is maintained, analysts believe that the market will remain on the current trajectory: uncertainty in the long term, but without sharp jumps in the short term. According to Goldman's baseline forecast, the meeting in Alaska will not have a significant short-term impact on Russian oil supplies.

Reaching an agreement whereby Russia can regain its former oil markets will be "extremely difficult," says Kevin Book of ClearView Energy Partners. He notes that Europe actually controls the possibility of restoring those markets, which gives it "a ticket to the negotiating table." According to him, Trump has allowed for "broad application" of new restrictive measures against Russia, so if negotiations fail, additional steps are possible, such as sanctions against the so-called shadow fleet - tankers used to circumvent Western restrictions.

Nevertheless, now it is quite difficult for geopolitical news to cause strong fluctuations in oil prices, the expert emphasized. "There is a rather skeptical mood in the market now. In recent years, traders had too many reasons to react to geopolitical risks," Book said. He recalled that the $13 jump in the price of Brent during Israel's war with Iran quickly came to naught - at the first signs of a truce, all risk disappeared from the market, "as if gravity had attracted it." Brook advises traders to keep this in mind as they await Friday's meeting: without a clear outcome, the market will remain in its current state of high supply, which is greatly aided by OPEC+ policy. He emphasized that without events that can really affect supply, serious market fluctuations are unlikely.

PVM analyst John Evans doubts that Trump will go for measures that could seriously disrupt oil supplies on the global market. According to him, any steps that would cause oil prices to rise - such as imposing secondary duties - would actually be a blow to the Trump administration itself. "And Moscow understands that very well," Evans summarized in a Reuters statement.

At trading on August 14, the price of October futures for benchmark Brent oil jumped by 1.3% to $66.5 per barrel. Contracts for North American WTI oil rose by almost the same amount - to $63.3 per barrel.

The US and Russian presidents will hold their first face-to-face meeting in six years on August 15. Trump initially said he would not agree to a meeting with Putin without Ukrainian President Vladimir Putin, but the Kremlin later confirmed that the meeting would take place bilaterally. Trump added Wednesday that if the first talks with Putin go well, he would seek a second trilateral meeting with Zelensky and possibly key European leaders. "It will be a very important meeting, but it's setting the stage for a second meeting," Trump said. He added that there would be no second summit unless his administration gets "the answers we need to get" and warned that Putin could face "very serious consequences" if he refuses to stop the strikes.

This article was AI-translated and verified by a human editor