Oil prices are marginally lower in early morning trading today, following the meeting between Presidents Trump and Zelensky. The Ukrainian leader appears to have pushed for more clarity around US security guarantees and reportedly is willing to offer a $100bn weapons deal in return for such guarantees.
There was no critical breakthrough. It appears the next step is a meeting between Zelensky and Putin, possibly within two weeks. This will be crucial, marking the first time the leaders meet since the war started. A big sticking point relates to territory. Putin wants Ukraine to concede Donetsk and Luhansk in their entirety — even parts of those regions not currently under Russian occupation. Zelensky has made it clear this isn’t something he would accept. We’ll have to wait until such a meeting to know how much flexibility there is on both the Russian and Ukrainian sides.
Betting markets aren’t overly convinced that we’ll see a ceasefire before the end of the year. Polymarkets is showing a 38% chance of a ceasefire, well below the peak of 78% seen in March. The modest price action in the oil market this morning appears to fit with this view.
The other big issue relating to Russia-Ukraine is the secondary tariffs the US placed on India for its imports of Russian oil. The deadline (27 August) to come to a deal before tariffs are introduced is nearing. To make matters worse, trade talks that were set to take place in late August have reportedly been postponed.
Finally, Ukraine said it attacked Russia’s Druzhba pipeline system, which carries crude oil to parts of central Europe. Both Hungary and Slovakia report disruptions due to the attack. Russian oil flows to both countries via the Druzhba average a little more than 200k b/d.