Oil and fuel prices hang in the balance of Trump and Putin peace talks

Whatever the outcome, it’ll create winners and losers in the energy space. Peace means lower fuel prices for consumers, even as a bearish oil sector turns increasingly pessimistic about the months and year ahead. On the other hand: Hardening stances and increased sanctions against Russia and buyers of Russian oil would add pain at the pump, while potentially reinvigorating a languishing oil industry and driving higher revenues, analysts said.

Regardless of the direction, incremental pricing swings are expected—and not any dramatic boom or bust. Russia can only add so much oil to the global marketplace if sanctions are removed. The problem for the already slowed oil sector is that even smaller downward pricing changes can exacerbate the industry’s struggles, given that OPEC has notably hiked its production volumes this year.

“I don’t think there’s a big wall of oil coming from Russia if peace breaks out,” said energy forecaster Dan Pickering, founder and chief investment officer for Pickering Energy Partners consulting and research firm. “My expectation is there’s a more significant impact on sentiment—’Here come the Russians’—than there would be on actual barrels.”

Russia produced 9.05 million barrels per day of crude oil in the second quarter of 2025, according to the U.S. Department of Energy (DOE), and analysts expect Russia could add back maybe 200,000 barrels daily in the short-to-medium term. That would represent a marked uptick, but not enough to truly upend oil markets.

“In a bullish market, the market probably shrugs it off. In a bearish market, every supply-related data point gets a little more weight than it probably should,” Pickering said. “There’s a bigger risk to sentiment than to the actual supply of oil.”

The main reason: Western sanctions on Russian oil haven’t been all that effective since Russia invaded Ukraine in 2022. China, India, and other buyers simply imported much more Russian oil, utilizing the so-called dark fleet of oil tankers that uses deceptive tactics to conceal what they’re shipping.

Still, Russian volumes have dipped from an estimated 9.2 million barrels daily in 2024 and from 9.6 million barrels in 2023, according to the DOE.

Russia is the third-largest oil producer in the world, well behind the U.S. and slightly behind Saudi Arabia. The three countries combine to produce more than 40% of global crude oil supplies daily: After them, no other country produces much more than 5 million barrels a day.

Increased sanctions would hurt Russia most if secondary sanctions were placed on buyers of Russian oil. Trump cited India’s oil purchases as a key reason for the sky-high 50% tariffs the U.S. recently placed on India. More secondary sanctions would undoubtedly push oil prices upward because fewer Russian barrels would find export destinations, likely curbing Russia’s output.

Global dynamics at play

These dynamics are playing out as the U.S. oil industry slows down activity and decreases production from recent record highs amid weaker oil prices.

The U.S. benchmark oil price was hovering near $63 per barrel on Aug. 14, below healthy profitability and just above the $60 threshold below which spending cuts and slowdowns have historically been enacted much more deeply. Analysts typically point to $70 per barrel as a sweet spot where profitability is stronger for U.S. producers and gasoline prices aren’t too high for consumers.

The national average for a gallon of regular unleaded gasoline averaged $3.08 at the beginning of this week, down 32 cents from a year prior, according to GasBuddy.

What the industry fears most is a global oil glut—”the four-letter word that has producers doubting their futures,” said Trey Cowan, analyst for the Institute for Energy Economics and Financial Analysis, in a new report ahead of the Russia peace talks.

The gap between global supply and demand expanded from 60,000 barrels per day a year ago to almost 1.3 million barrels by mid-2025, according to the DOE, which is at least glut adjacent. Against this backdrop, OPEC and its key allies including Russia, called OPEC+, pledged to boost oil output by another 1 million barrels daily over the coming months to regain market share, which comes on top of 1.2 million barrels they already added to markets since the beginning of April.

Those extra OPEC+ barrels alone could push U.S. oil prices below the $60 threshold later this year or into 2026. “I don’t see how U.S. production doesn’t dip next year,” Pickering said.

Already, the number of active rigs drilling for oil in the U.S. has plunged by 15% since April; it’s down to 411 rigs, a loss of 70 rigs, according to research firm Enverus. That hardly Trump’s “Drill, baby, drill” theme.

Big Oil giant Chevron already cut its drilling rigs in the booming Permian Basin from 13 to nine this year, just after achieving a new record of 1 million barrels of oil equivalent per day from the Permian.

The plan now is to keep production steady while cutting costs, increasing free cash flow, and hiking shareholder dividends, said Bruce Niemeyer, Chevron president of shale and tight oil. Further activity reductions are expected, he told Fortune, although the cutbacks are strategic and not in response to Russia or OPEC.

“We recognize we don’t control that,” Niemeyer said of Russia. “So we do our planning long term, and we do it across a variety of scenarios. We’re resilient at low prices.”

Even if oil prices are weaker, Russia would still be motivated to hike oil exports if sanctions are removed. The country’s oil production is currently limited in part by weakened infrastructure, technology, and skilled labor, all resulting from the war. For instance, Ukraine successfully bombed Lukoil’s Volgograd oil refinery on Aug. 14, just ahead of the peace talks.

“The U.S. producers are capital disciplined,” Pickering said. “The Russian producers are going be focused on cash flows and getting dollars. Russian producers are likely to be much more volume focused than the U.S. producers.”