Oil prices surge to 2-week high: What's the reason?
What's the story
Oil prices have hit a two-week high, driven by expectations of US Federal Reserve interest rate cuts and geopolitical tensions in Russia and Venezuela. The Brent crude oil futures rose by 0.8% to $63.75 per barrel, while the West Texas Intermediate (WTI) crude increased by 0.7% to settle at $60.08 yesterday. These were the highest closing prices for both crude benchmarks since November 18.
Market performance
Weekly gains for Brent and WTI
For the week, Brent crude registered a gain of about 1%, while WTI crude rose by some 3%. This marks the second consecutive weekly gain for both contracts. Investors are now digesting a US inflation report and adjusting their expectations for an interest rate cut at the Fed's December 9-10 meeting.
Market influences
Fed rate cut and trade talks influence oil prices
Traders are pricing in an 87% chance of a 25 basis points rate cut next week, according to CME Group's FedWatch Tool. Meanwhile, top Chinese and US officials held a call on Friday to discuss trade, including the ongoing efforts to de-escalate their trade war.
Supply concerns
Geopolitical tensions and US military incursion impact oil supply
Investors are also closely watching news from Russia and Venezuela to determine the future of oil supplies from these two sanctioned OPEC+ members. The failure of US talks in Moscow to achieve any significant breakthrough over the war in Ukraine has further boosted oil prices this week. Meanwhile, markets are concerned about potential US actions in Venezuela after Donald Trump reiterated plans to take action against Venezuelan drug traffickers on land "very soon."