Oil prices under pressure ahead of Trump-Putin meeting - Commerzbank

Oil prices last week recorded their sharpest weekly declines since the end of June. At the same time, they fell to their lowest levels in two months. Brent is down 7% compared to the beginning of the month, WTI 7.5%. Several factors are responsible for this, Commerzbank's commodity analyst Carsten Fritsch notes.

Looming oversupply points to an asymmetric market reaction

"These include a combination of significantly rising supply from OPEC+ and demand concerns after a series of disappointing economic data in the two most important Oil-consuming countries, the US and China. With autumn approaching, this threatens to create an even larger oversupply on the Oil market, provided that there are no sanctions-related disruptions. The risk of this happening has recently decreased. The meeting between US President Trump and Russian President Putin scheduled for Friday has raised new hopes for a ceasefire in Ukraine and even a possible easing of sanctions."

"At least the likelihood of tougher sanctions against Russia, as were on the table just a week ago, has decreased. It is unlikely that Trump will impose secondary tariffs on other countries besides India for their purchases of Russian Oil before his meeting with Putin. If Friday's meeting brings a ceasefire or even a peace deal in Ukraine closer, Trump could suspend the secondary tariffs imposed on India last week before they come into force in two weeks."

"If not, we could see tougher sanctions against other buyers of Russian Oil, like China. The looming oversupply points to an asymmetric market reaction. That means the price drop after a successful summit would probably be bigger than the price increase if the summit doesn't come up with anything substantial."