Oil holds at two-week highs on expected US rate cut, geopolitical risks

Oil prices hovered at two-week highs on Monday as investors expect a Federal Reserve interest rate cut this week that will lift economic growth and energy demand while eyeing geopolitical risks that threaten oil supplies from Russia and Venezuela.

Brent crude futures rose 4 cents, or 0.06%, to $63.79 a barrel by 0008 GMT, while U.S. West Texas Intermediate crude was at $60.15 a barrel, up 7 cents, or 0.12%.

Both contracts closed Friday’s session at their highest levels since November 18.

Markets are pricing in an 84% chance of a quarter-point cut at the Fed meeting on Tuesday and Wednesday, LSEG data show, although it is expected to be one of its most contentious in years and investors are focused on the U.S. central bank’s policy direction and internal dynamics.

In Europe, progress in Ukraine peace talks remains slow, with disputes over security guarantees for Kyiv and the status of Russian-occupied territory still unresolved.

“The outcome of current negotiations could have a big impact on the oil market,” ANZ analysts said in a note.
“The various potential outcomes from Trump’s latest push to end the war could release a swing in oil supply of more than 2 million barrels per day.” In the meantime, the Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban, sources familiar with the matter told Reuters, which may curb supplies from the world’s second-largest producer.

The U.S. has also ramped up pressure on OPEC member Venezuela, including strikes against alleged drug-smuggling boats and threats of military action to overthrow President Nicolas Maduro’s government.

Chinese independent refiners have stepped up purchases of sanctioned Iranian oil from onshore storage tanks using newly issued import quotas, trade sources and analysts said, easing a supply glut.