Oil prices moved higher yesterday as the initial enthusiasm over progress towards a ceasefire between Russia and Ukraine continues to fade, ING's commodity experts Ewa Manthey and Warren Patterson note.

Hopes for an imminent ceasefire between Russia and Ukraine fade

"It’s proving difficult to set up a Putin-Zelensky summit, while discussions around potential security guarantees face obstacles. Russia suggests, for example, that it should be part of any security guarantees for Ukraine. Not helping matters is Russia launching its largest strike on Ukraine in over a month. The less likely a ceasefire looks, the more likely the risk of tougher sanctions."

"Meanwhile, President Trump’s trade advisor, Peter Navarro, said he expects that secondary tariffs on India for its purchases of Russian oil to go ahead next week. An additional 25% tariff is set to come into effect on 27 August. While Indian refiners initially took a step back from buying Russian crude when these tariffs were announced, reports are that attractive discounts have Indian refiners showing increased interest once again. This poses upside risk for the oil market. If tariffs push India away from buying Russian oil, and Russia can’t divert this supply to other buyers, domestic producers would be forced to reduce supply. However, this is less of a concern if India continues with its Russian crude purchases."

"This week has also seen a further easing in the tightness in the middle distillate market. Yet the gasoil crack has strengthened this week, along with the prompt ICE gasoil timespread. This comes amid some refinery outages. Gasoil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region increased by 170kt WoW to 2.03mt, helping to take stocks closer towards the seasonal 5-year average. Meanwhile, middle distillate stocks in Singapore increased by 371k barrels. Increases in ARA and Singapore follow a 2.34m barrel increase that the Energy Information Administration (EIA) reported earlier this week in US distillate stocks."