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Brent and WTI up 0.7%, after hitting two-month low in

previous

session

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Trump threat, Fed interest rate cut bets support prices

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Trump meets Putin on Friday to discuss war in Ukraine

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Rising supply adds to bearish outlook

(Updates prices as of 0631 GMT)

By Katya Golubkova and Siyi Liu

TOKYO/SINGAPORE, Aug 14 (Reuters) - Oil prices climbed

on Thursday as investors weighed what impact the U.S.-Russia

summit on Ukraine on Friday might have on Russian crude flows,

with secondary sanctions looming over Moscow's customers, while

a rising supply outlook capped gains.

Brent crude futures rose 45 cents, or 0.7%, to

$66.08 a barrel at 0631 GMT, while U.S. West Texas Intermediate

crude futures gained 44 cents, also up 0.7%, to $63.09.

Both contracts hit their lowest in two months on Wednesday

after bearish supply guidance from the U.S. government and the

International Energy Agency (IEA).

Trump on Wednesday threatened "severe consequences" if Putin

does not agree to peace in Ukraine. Trump did not specify what

the consequences could be, but he has warned of economic

sanctions if the meeting in Alaska on Friday proves fruitless.

"The uncertainty of U.S.-Russia peace talks continues to add

a bullish risk premium given Russian oil buyers could face more

economic pressure," Rystad Energy said in a client note.

"How Ukraine-Russia crisis resolves and Russia flows change

could bring some unexpected surprises."

Trump has threatened to enact secondary tariffs on buyers of

Russian crude, primarily China and India, if Russia continues

with its war in Ukraine.

"Clearly there's upside risk for the market if little

progress is made" on a ceasefire," said Warren Patterson, head

of commodities strategy at ING, in a note.

The expected oil surplus through the latter part of this

year and 2026, combined with spare capacity from the

Organization of the Petroleum Exporting Countries, means that

the market should be able to manage the impact of secondary

tariffs on India, Patterson said.

But things become more difficult if we see secondary tariffs

on other key buyers of Russian crude oil, including China and

Turkey, he said.

Expectations the U.S. Federal Reserve will cut rates in

September are also supportive for oil. Traders are almost 100%

agreed a cut will happen after U.S. inflation increased at a

moderate pace in July.

Treasury Secretary Scott Bessent said he thought an

aggressive half-point cut was possible given recent weak

employment numbers.

The market is putting the odds of a quarter-percentage point

cut at the Fed's September 16-17 meeting at 99.9%, according to

the CME FedWatch tool.

Lower borrowing rates would drive demand for oil.

Oil prices were kept in check as crude inventories in the

United States unexpectedly rose by 3 million barrels in the week

ended on August 8, according to the U.S. Energy Information

Administration on Wednesday.

Also holding oil prices back was an International Energy

Agency forecast that 2025 and 2026 global supply would rise more

rapidly than expected, as OPEC and its allies increase output

and production from outside the group grows.