Oil prices rose in Asian trade on Tuesday, extending recent gains as Ukraine’s attacks on Russian oil facilities spurred increased concerns over potential supply disruptions.
Russian forces launched a massive attack on Ukraine’s southeastern city of Zaporizhzhia, following a series of strikes by Kyiv against Russian oil infrastructure in recent weeks.
Oil also took some support from weakness in the dollar, as the greenback lost ground amid increasing conviction the Federal Reserve will cut interest rates at a policy meeting this week.
Brent oil futures for November rose 0.3% to $67.63 a barrel, while West Texas Intermediate crude futures rose 0.3% to $63.21 a barrel by 21:54 ET (01:54 GMT).
Russia-Ukraine war fuels supply concerns, offsets weak outlook
Ukraine ramped up its offensive against Russia over the past two weeks, especially after U.S.-brokered peace talks were seen as largely inconclusive.
Kyiv was seen especially targeting Russian oil facilities in an attempt to stymie Moscow’s ability to fund its war against Ukraine.
U.S. President Donald Trump last week called for second-order sanctions against Russia’s oil industry, this time targeting major buyers such as India and China. Trump had slapped India with 50% trade tariffs in late-August over the matter.
Trump was also seen calling on the NATO, European Union, and G7 countries to stop buying Russian oil and to increase tariff pressure on India and China.
Concerns over Russian supply disruptions helped oil markets look past an otherwise bloated outlook for supply in the coming quarters. Steadily increasing output from the OPEC, coupled with strong production in non-OPEC countries, is expected to drive up global oil levels in the coming months.
Global oil demand is also expected to remain on the backfoot, having barely recovered in China over the past two years. U.S. fuel demand is also expected to cool during the winter season.
Bernstein analysts said Brent was at risk of sliding to $60/barrel if supply continued to outpace demand, and that the global oil surplus could rise to 1.9 million barrels per day in this quarter.
The only source of upside could be stricter sanctions against Russia, Bernstein said.
Softer dollar benefits oil, Fed rate cut awaited
A softer dollar benefited oil in recent weeks, as the greenback was dented by expectations of an interest rate cut by the Fed this week.
The central bank is widely expected to cut rates by at least 25 basis points on Wednesday, amid some cooling in the labor market.
But the Fed’s outlook on rates remains uncertain, especially in the face of sticky inflation.
Still, lower rates stand to boost economic activity and could potentially drive up oil demand.
Source :
https://www.investing.com/news/commodities-news/oil-prices-upbeat-as-russiaukraine-strikes-spur-supply-fears-fed-in-focus-4239708
