Oil Prices Steady Near Two-Week Highs as Markets Await Fed Decision and Monitor Global Supply Risks

BY COMFORT OGBONNA

Oil prices held close to their strongest levels in two weeks on Monday, supported by expectations that the U.S. Federal Reserve will cut interest rates this week—a move many investors believe could stimulate economic growth and increase energy demand. At the same time, traders are keeping a close eye on geopolitical tensions that continue to threaten crude supplies from both Russia and Venezuela.

Brent crude futures slipped by 25 cents, or 0.4%, to $63.50 a barrel by 0922 GMT, while U.S. West Texas Intermediate crude also dipped 25 cents, or 0.4%, to $59.83. Even with the slight pullback, both benchmarks ended Friday’s session at their highest levels since November 18, reinforcing the sense of optimism that has built around a potential policy shift by the U.S. central bank.

Market analysts note that investors are largely in a holding pattern ahead of the Federal Reserve’s rate decision and further developments in the slow-moving Ukraine peace negotiations. Tamas Varga, an analyst with PVM, said the oil market is clearly in “wait-and-see mode,” with sentiment hinging on whether any form of resolution emerges in discussions surrounding the conflict in Ukraine. A breakthrough, he added, could enable an increase in Russian oil exports, putting renewed downward pressure on global prices.

Current market pricing indicates an 84% probability of a quarter-point interest-rate cut when the Fed meets on Tuesday and Wednesday, according to LSEG data. However, differing public comments from Federal Reserve board members suggest this meeting could be among the most contentious in years. Investors are therefore paying close attention not only to the outcome of the vote but also to the tone of the committee’s internal debate, as it may shape the trajectory of U.S. monetary policy heading into 2025.

In Europe, efforts to advance peace talks over Ukraine remain sluggish. Major sticking points continue to include long-term security guarantees for Kyiv and the unresolved status of Russian-held territories. U.S. and Russian officials also remain divided over the peace proposal currently being pushed by the administration of U.S. President Donald Trump.

Analysts at ANZ noted that the possible scenarios emerging from Washington’s renewed focus on ending the war could shift the global oil supply by more than 2 million barrels per day, depending on how negotiations unfold. Meanwhile, Commonwealth Bank of Australia analyst Vivek Dhar highlighted that a ceasefire in Ukraine remains the biggest potential downside risk for oil prices, as it could reopen supply channels for Russian crude. On the other hand, prolonged or increased damage to Russia’s oil infrastructure would likely push prices higher. Dhar added that oversupply concerns may eventually return as Moscow continues finding ways to bypass sanctions, potentially driving futures toward $60 per barrel through 2026.

Negotiations are also under way between Group of Seven nations and the European Union to replace the current price cap on Russian oil with a full maritime services ban, a move that could significantly choke off Russia’s ability to export crude. Such a shift would likely tighten global supply further, adding another layer of uncertainty for traders.

The United States has intensified pressure on Venezuela as well, taking actions that include targeting vessels accused of drug smuggling and hinting at the possibility of military intervention aimed at removing President Nicolás Maduro. Any escalation involving the OPEC member state could disrupt production and ripple through global markets.

Meanwhile, in Asia, Chinese independent refiners have expanded their purchases of sanctioned Iranian crude, drawing from onshore storage tanks after receiving fresh import quotas. This renewed buying interest has helped ease a supply overhang, contributing to the complex interplay of forces shaping global oil prices.

As markets await the week’s key decisions and geopolitical developments, traders remain cautiously optimistic but alert, aware that both policy shifts and diplomatic breakthroughs could swiftly change the balance of supply and demand across the global oil landscape.