Oil prices declined by nearly 1% on Tuesday as discussions between U.S. President Donald Trump and Russian President Vladimir Putin signaled potential de-escalation in the ongoing Ukraine conflict. The possibility of reduced sanctions on Russian fuel exports contributed to the downward pressure on crude prices.
Market Response to Diplomatic Talks
As part of their discussion, Trump and Putin reportedly agreed to a temporary 30-day ceasefire that would halt attacks on each other’s energy infrastructure. While this development provided some relief to global markets, analysts remain cautious about the long-term impact on oil supplies.
Brent crude futures dropped by 0.7% to settle at $70.56 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by 1.0% to $66.90 per barrel.
Economic Concerns Weigh on Oil Prices
In addition to geopolitical factors, economic uncertainties related to Trump’s trade tariffs contributed to the decline in oil prices. The Organisation for Economic Co-operation and Development (OECD) warned that U.S. tariffs could negatively impact economic growth in North America, leading to a slowdown in energy demand.
Furthermore, while U.S. homebuilding showed signs of recovery in February, rising construction costs due to tariffs and labor shortages posed significant challenges.
OPEC+ and Global Oil Supply
Earlier this month, OPEC+ confirmed its decision to proceed with an oil output increase in April. Analysts at Wood Mackenzie projected that Brent crude prices would average $73 per barrel in 2025, down from the previous year’s average due to OPEC+ production plans and ongoing trade disputes.
Middle East Tensions and Market Volatility
Market volatility was further exacerbated by tensions in the Middle East. The U.S. vowed to continue targeting Iran-backed Houthi militants in Yemen unless attacks on Red Sea shipping lanes cease. Trump also warned Iran against any retaliatory actions, increasing fears of potential disruptions to oil supplies.
Additionally, ongoing conflicts in Gaza led to heightened instability, with Israeli airstrikes reportedly resulting in significant casualties. These geopolitical developments remain a key factor influencing global oil markets.
U.S. Oil Inventories and Future Outlook
The American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) are set to release new inventory data, with analysts expecting a moderate build-up in U.S. oil stockpiles. Despite short-term price fluctuations, the broader energy market remains uncertain, shaped by diplomatic efforts, economic policy, and geopolitical tensions.