The relentless march in stocks continues, as the CME FedWatch tool now indicates a 94% probability of a September cut in US lending rates, even without further undue pressure on the Fed chair. The latest nudge came from July inflation data, which showed headline consumer prices rising by 2.7%, lower than expected. The main factor behind the better-than-expected reading was energy, as the petrol price index plunged 9.5% year-on-year. This also meant the core figure, which excludes food and energy, increased by a forecast-beating 3.1%.

The prevailing view is that US tariffs are having a negligible impact on inflation. For now, the mood remains buoyant; however, this upbeat sentiment could reverse as the year progresses and further data on consumer prices, spending, and the labor market emerge.

Oil prices drifted lower on expectations that Friday’s summit between Donald Trump and Vladimir Putin would not result in additional sanctions on Russia, ensuring the country’s oil continues to flow predominantly to the south and east. Long-term support, however, came from OPEC’s updated monthly report on global supply and demand.

OPEC still anticipates stable economic growth; consequently, there was no reason to curtail its oil demand forecast. At 105.13 mbpd, demand is expected to grow by 1.33 mbpd in 2025. Non-DoC supply will expand at a slower pace, 820,000 bpd to be precise, meaning the call on non-DoC oil will rise from 42.10 mbpd in 2024 to 42.43 mbpd in 2025. Notwithstanding the rapid unwinding of voluntary cuts, global supply is projected to show a deficit of around 600,000 bpd for the year and 850,000 bpd for 2H 2025, even under the generous assumption of a DoC output level of 42.55 mbpd for the second half.

Underlying optimism intensifies for 2026, which has seen an upward revision in global consumption and a cut in non-DoC supply. With demand growth outpacing supply increases by 700,000 bpd, the call on DoC oil will jump to 43.13 mbpd next year, above the latest EIA forecast of 42.71 mbpd, ensuring substantial depletion of global oil inventories.

The Most Unlikely Scenario

Friday’s summit between the US and Russian leaders will be consequential, but to call its outcome ambiguous would be an understatement. It is yet another round of talks about Ukraine in which not only was the menu not presented to the president of the occupied nation, but not even a seat was offered at the table—although that might change at the last minute. Or, as the Financial Times put it: if you are not at the table, you are on the menu.

It is clear what Vladimir Putin wants to achieve, less so what Donald Trump is prepared to offer or accept. The Russian leader has been steadfast in his demands ever since the initial blitzkrieg to invade Ukraine and overthrow its West-friendly government went horribly wrong. In the fourth year of the conflict, he still insists that the “root causes of the crisis” must be eliminated. This means ceding the already occupied territories of Luhansk and Donetsk, and parts of Kherson and Zaporizhzhia; formally recognising Crimea as part of Russia; and “demilitarising” and “denazifying” the country, effectively pledging that Ukraine will never join NATO and that its president will resign.

President Trump, by contrast, has been far less consistent in his views on how to end the conflict. Many still remember the disgraceful public humiliation of Volodymyr Zelensky in the Oval Office. Mr Trump’s admiration for Vladimir Putin once led him to halt arms supplies to and intelligence sharing with Ukraine. Yet lack of progress eventually forced him into a U-turn, and more recently he has openly criticised Russia’s leader and threatened to tighten the sanction screw, including further restrictions on energy exports.

It is against this backdrop that the two leaders will face off the day after tomorrow. For Ukraine and its Western backers, ceding territory to Russia is the thickest of red lines, despite hints from the White House that such a move might be imperative to end the conflict or at least achieve a truce. Russia hopes that if Ukraine refuses to give up any of its territory, the US will withdraw its support.

But what if the US decided to play hardball with Russia? Such a strategy would make sense in several ways. The Russian economy is struggling, and unless Moscow agrees to an immediate ceasefire, further and stricter sanctions could be imposed. The resulting, and possibly short-lived, rally in oil prices would be a small price to pay for forcing Russia to make meaningful compromises. Supplying weapons to Ukraine via the EU could be both transactional and financially beneficial for the US. Additional concessions in Ukraine, similar to the mineral resource deal struck in February, might also appeal to the president. And, keeping in mind President Trump’s personal ambitions, European countries and Ukraine could even offer to nominate him for the Nobel Peace Prize in return for a favourable agreement with Russia. This approach worked well in Pakistan’s case: there is now growing collaboration between Washington and Islamabad in the field of cryptocurrency, while India, Pakistan’s arch-rival, has fallen out of favour with the US administration.

The sub-headline labels this scenario as “most unlikely” for good reasons. First, cornering Putin could provoke an unpredictable response, including the possible use of nuclear weapons, something Donald Trump abhors. He equally loathes surging oil prices ahead of the midterm elections, and current market sentiment suggests no serious disruption to Russian energy exports. Most importantly, the president is a staunch believer in the Monroe Doctrine and the “sphere of influence” theory. In his view, a Yalta-style division of the globe among the world’s leading powers—the US, Russia, and China—would offer the safest, most predictable path forward and help “make America great again.” For these reasons, no breakthrough is expected, and an agreement to freeze the current front lines while pledging to continue ceasefire talks would be considered a major achievement. Donald Trump does not have the cards. Putin does.

Overnight Pricing