Commodities Outlook: Oil Slips Amid Hopes for Possible Zelensky

Global oil markets opened lower on Monday as attention shifted toward the possibility of direct negotiations between Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin. The dip followed a recent meeting between U.S. President Donald Trump and Zelensky, which ended without significant progress on security or defense assurances. Reports suggest Zelensky may have floated a $100 billion weapons arrangement in exchange for firm U.S. guarantees, but no agreement was reached.

The next key development could be a potential face-to-face meeting between Zelensky and Putin in the coming weeks—their first since the conflict began. The central obstacle remains territorial disputes. Putin is reportedly insisting on Ukraine’s full cession of Donetsk and Luhansk, including areas not currently under Russian control, a condition Zelensky has firmly rejected. Markets are watching closely to gauge whether either side will show flexibility.

Prediction markets reflect skepticism that a ceasefire will materialize before year-end. Current odds stand at roughly 38%, down significantly from a March high of nearly 80%. Oil price movements this morning mirror these muted expectations.

Meanwhile, geopolitical risks are deepening elsewhere. Washington’s secondary tariffs on Indian purchases of Russian crude are set to take effect on August 27 unless a compromise is reached. Planned trade talks to address the issue have reportedly been delayed, further clouding the outlook. Adding to uncertainty, Ukraine has claimed responsibility for an attack on Russia’s Druzhba pipeline, which transports crude into Central Europe. Hungary and Slovakia have already reported supply disruptions, with Russian flows averaging just over 200,000 barrels per day through this route.

Beyond energy, commodities markets face pressure from slowing demand in China. July steel output fell for the third straight month to a yearly low as Beijing imposed supply restrictions and tightened pollution controls ahead of a military parade. Aluminium trade, however, showed mixed signals: imports surged 38% year-on-year, while alumina exports climbed 56%.

In agriculture, China’s reliance on foreign grain continues to shrink. Corn imports plummeted nearly 95% in July, while wheat shipments dropped by almost half, reflecting abundant domestic supply and stockpiling policies. On the other hand, Russia’s wheat outlook improved, with production now forecast at 85.5 million tonnes for 2025—an upgrade from earlier estimates—supporting higher export projections for the upcoming season.