Oil turns higher amid skepticism Trump's 'energy ceasefire' between Russia and Ukraine will improve supply

Oil prices experienced a reversal of early losses on Monday, despite expectations for enhanced supplies following the announcement of an "energy ceasefire" between Russia and Ukraine by U.S. President Donald Trump.

Futures contracts for Brent crude, the global price benchmark, for December delivery increased by 0.69%, reaching $105.44 per barrel. Concurrently, U.S. West Texas Intermediate (WTI) futures for November saw a 0.54% rise, settling at $92.35 per barrel. Both benchmarks had registered a decline of approximately 1.5% earlier in the trading session.

"Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Both parties have agreed. Do not break it!" Trump announced in a statement on social media on Sunday.

The uptick in oil prices followed a response from Ukrainian President Volodymyr Zelenskyy, who expressed his support for the ceasefire, although he emphasized the necessity for Moscow to reciprocate.

The likelihood of additional Russian energy supplies entering the market has been bolstered by Trump's assertion on Friday that Russia will contribute over 4 million tons of diesel to the global market as a result of a deal he negotiated with Putin during a recent phone call.

In related developments, the Saudi state news agency reported that Iran's Minister of Foreign Affairs, Abbas Araghchi, communicated with Saudi Arabia’s Minister of Foreign Affairs, Faisal bin Farhan bin Abdullah, focusing on the region's escalating events and potential solutions.

Al Jazeera highlighted Araghchi's indication that Iran is prepared to facilitate dialogue between Saudi Arabia and Yemen's Houthis.

In the short term, oil prices are anticipated to remain volatile, influenced by ongoing U.S.-Iran tensions, while the repercussions of Hurricane Isaias on American energy production could further strain supplies.

UOB noted, "The pressure on oil prices could remain on the upside as Hurricane Isaias intensified to Category 3, with winds reaching 120 mph as it approached the U.S. Gulf Coast, prompting energy producers to reduce offshore output."

Additionally, UOB remarked that the recent Houthi missile strikes on Riyadh airport in Saudi Arabia, which resulted in 12 fatalities and over 300 injuries, have significantly increased geopolitical risk premiums in the Middle East.