Oil Prices Edge Higher as Ukraine Conflict Escalates and US Stocks Fall

Oil prices held steady on Friday, with markets balancing hopes for diplomatic progress in Ukraine against renewed fighting and a sharp fall in US crude inventories. The developments placed crude benchmarks on track for their first weekly gain in three weeks.

Brent crude futures rose 8 cents, or 0.1 percent, to $67.75 a barrel by 11:15 a.m. Saudi time, while West Texas Intermediate (WTI) crude gained 12 cents, or 0.2 percent, to $63.64. Both contracts had climbed by more than 1 percent in the previous session, with Brent advancing 2.8 percent so far this week and WTI up 1.4 percent.

“Everyone is waiting for President Trump’s next step,” said Giovanni Staunovo, a commodities analyst at UBS. “Over the coming days, it seems nothing will happen.”

The conflict in Ukraine showed no signs of abating this week. Russia launched an air attack near Ukraine’s border with the European Union on Thursday, while Kyiv claimed responsibility for strikes on a Russian oil refinery and the Unecha pumping station, a vital part of the Druzhba pipeline that delivers crude to Europe. Hungary later confirmed that shipments through the pipeline had been halted.

Amid the fighting, US President Donald Trump has been attempting to broker a peace deal between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky. However, arranging a summit faces major hurdles, particularly over security guarantees. Analysts at ING noted that the less likely a ceasefire becomes, the greater the risk of tougher US sanctions on Russia.

Diplomatic challenges are compounded by Moscow’s demands. According to sources, Putin has insisted that Ukraine surrender the entire Donbas region, abandon NATO membership, and keep Western forces out of its territory. Zelensky has rejected the idea of ceding internationally recognized land, while Trump has pledged that Washington would protect Ukraine as part of any agreement.

In the meantime, military planners in both Washington and Europe have presented new options to their national security advisers following the first in-person meeting between US and Russian leaders since the invasion.

Away from geopolitics, supply and demand fundamentals also lent support to crude prices. The US Energy Information Administration reported a much larger-than-expected fall in oil inventories, with stocks down 6 million barrels in the week ending August 15. Analysts had forecast a draw of only 1.8 million barrels, suggesting stronger demand.

However, weak economic data from Germany weighed on sentiment. Europe’s largest economy contracted by 0.3 percent in the second quarter, raising concerns over demand prospects in the region.

Markets also turned their attention to the annual Jackson Hole economic symposium in Wyoming, where US Federal Reserve Chair Jerome Powell was due to speak on Friday. Investors are watching closely for signals of an interest rate cut next month, which could stimulate economic growth and increase oil consumption, further influencing prices.

With geopolitical tensions escalating and economic signals mixed, oil markets are expected to remain volatile in the coming weeks.