Crude markets edge upward as investors eye Federal Reserve policy, rising geopolitical tensions, and shifting global supply risks.
Oil prices hovered near a two-week high on Monday as investors positioned themselves for a potential U.S. Federal Reserve interest rate cut expected later this week, an action many believe could strengthen economic activity and boost energy demand.
Brent crude futures added 9 cents (0.14%) to trade at $63.84 per barrel at 04:21 a.m. WAT, while U.S. West Texas Intermediate (WTI) rose 8 cents (0.13%) to $60.16 per barrel.
Both benchmarks ended Friday at their strongest levels since November 18.
Market sentiment has been shaped largely by expectations that the Fed will lower rates, with traders pricing in an 84% probability of a quarter-point cut during the central bank’s two-day meeting, according to LSEG data. However, remarks from several board members suggest the gathering could be one of the most contentious in years, intensifying scrutiny of the Fed’s internal stance and long-term policy direction.
Geopolitical Risks Add Up
Beyond U.S. monetary policy, traders are watching geopolitical developments that could disrupt Russian and Venezuelan crude supply.
In Europe, attempts to advance Ukraine peace negotiations remain sluggish. Disagreements persist over Kyiv’s security guarantees and the fate of Russian-held territories. U.S. and Russian officials also remain split over the peace proposal backed by the administration of President Donald Trump.
Analysts at ANZ told clients that various scenarios emerging from Trump’s latest diplomatic push could swing global oil supply by more than two million barrels per day.
Commonwealth Bank of Australia analyst Vivek Dhar noted that while a ceasefire in Ukraine poses a downside risk for prices, sustained damage to Russia’s energy infrastructure could provide significant upward pressure.
“We think oversupply concerns will eventually be realised… prompting futures to gradually track towards $60/bbl through 2026,” Dhar said.
Global Policy Shifts Shape Supply Outlook
Meanwhile, the Group of Seven (G7) nations and the European Union are discussing replacing the current price cap on Russian oil with a broader maritime services ban, a move that could further restrict exports from the world’s second-largest producer.
The United States has simultaneously increased pressure on Venezuela, targeting boats allegedly involved in drug smuggling and signaling potential military action against President Nicolas Maduro’s government.
In Asia, Chinese independent refiners have been ramping up purchases of sanctioned Iranian crude, drawing from onshore storage and using newly approved import quotas, a trend analysts say is helping ease a buildup in global supply.
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