Oil prices fell over 2% on Wednesday after U.S. President Donald Trump took initial steps toward diplomacy to resolve the Ukraine war.. Brent crude settled down $1.82 (2.36%) at $75.18 per barrel, while WTI dropped $1.95 (2.66%) to $71.37 per barrel. This decline followed a three-day rally, during which Brent rose 3.6% and WTI gained 3.7%. Analysts noted that Trump’s engagement with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy reduced the geopolitical risk premium in oil prices.
Further pressure came from stronger-than-expected U.S. inflation data, which dampened expectations of early interest rate cuts by the Federal Reserve. Fed Chair Jerome Powell indicated that the central bank is in no rush to cut rates, though it remains prepared to act if inflation cools or the job market weakens. Analysts now anticipate potential rate cuts being pushed from September to December. Higher interest rates tend to slow economic activity and curb oil demand, contributing to the downward pressure on prices.
On the supply front, the EIA reported a larger-than-expected build in U.S. crude inventories, while gasoline stocks posted an unexpected draw. Russia may be forced to cut oil production in the coming months due to U.S. sanctions restricting access to tankers and Ukrainian drone attacks on refineries. Meanwhile, OPEC maintained its global oil demand growth forecast, expecting an increase of 1.45 million barrels per day (bpd) in 2025 and 1.43 million bpd in 2026. The EIA raised its U.S. crude production estimate for 2025 to 13.59 million bpd, up from 13.55 million bpd.
Additionally, the Trump administration appointed Kathleen Sgamma—a vocal advocate for oil and gas development—to lead the Bureau of Land Management, which oversees 250 million acres of public land. Her appointment signals potential policy shifts favoring increased domestic energy production.