WTI recovers after multi-month low, geopolitical easing, Fed rate cut hopes lift Oil

• The WTI US Oil recovers after hitting a low of $56.15, supported by a modest return of risk appetite.
• The planned meeting between Donald Trump and Vladimir Putin in Budapest raises hopes of an end to the war in Ukraine.
• The sharp rise in US Crude Oil inventories and expectations of a Federal Reserve rate cut may limit further gains.

West Texas Intermediate (WTI) US Oil rebounds on Friday to around $57.00 after reaching a new low since May earlier in the day at $56.15. The market is attempting to stabilize after a volatile week marked by mixed signals between geopolitical easing and supply excess.

The announcement of a future summit between US President Donald Trump and Russian President Vladimir Putin in Hungary has boosted expectations of an easing in the Russia-Ukraine conflict. A possible de-escalation could reduce risks to global energy flows, which in turn weighs on Oil prices.

"Concerns about tighter supplies eased after it was announced that Trump would be meeting with Putin to discuss ending the war in Ukraine," noted Daniel Hynes, analyst at ANZ.

On the fundamental side, data from the US Energy Information Administration (EIA) on Thursday reinforced the short-term bearish tone. Crude Oil inventories in the United States rose by 3.524 million barrels in the previous week, far exceeding the 120,000-barrel forecast. This marks the third consecutive weekly build, reflecting resilient production and weaker refinery demand. According to ING, total Crude Oil stocks now stand at 423.8 million barrels, the highest since early September.

However, the impact of these figures is partly offset by growing expectations of another monetary easing move by the Federal Reserve (Fed). Markets are currently pricing in a nearly 98% chance of a 25-basis-point rate cut at the October meeting, followed by another reduction in December. A more accommodative Fed policy would likely weaken the US Dollar (USD) and support the USD-denominated Oil prices.

Meanwhile, Commerzbank believes that the International Energy Agency (IEA) overestimates the risk of a massive 4-million-barrel-per-day surplus expected next year. According to analyst Carsten Fritsch, the IEA's assumptions about non-OPEC+ production are "too ambitious," suggesting that the additional supply could be more limited, which helps to contain downward pressure on Oil prices in the medium term.

Thus, while WTI US Oil remains lower for the week, a combination of potential geopolitical easing and expectations of US monetary stimulus helps stabilize prices around $57.00 on Friday.