Oil prices remained stable in early trading on Tuesday, following an increase in the previous session, as market participants assessed the potential for supply disruptions from Russia in light of Ukrainian drone attacks on its refineries. Brent crude futures increased by 4 cents to $67.48 a barrel as of 0000, while U.S. West Texas Intermediate crude rose by 2 cents to $63.32. On Monday, Brent closed up 45 cents at $67.44, while WTI finished 61 cents higher at $63.30.
Ukraine has escalated its assaults on Russia’s energy infrastructure to undermine Moscow’s military capacity, coinciding with a stagnation in negotiations aimed at resolving their conflict. According to analyst Tony Sycamore, “Heightened fears of supply disruptions from Russia, a key producer accounting for over 10% of global oil output” is contributing to the rise in oil prices. U.S. Treasury Secretary Scott Bessent on Monday stated that the government would refrain from imposing further tariffs on Chinese goods to incentivize China to cease its purchases of Russian oil, unless European nations impose significant duties on China and India themselves.
Market participants are closely monitoring the upcoming U.S. Federal Reserve meeting scheduled for September 16-17, where a reduction in interest rates is anticipated. Reduced borrowing costs may enhance fuel demand. “A weaker U.S. dollar, driven by expectations of a Federal Reserve rate cut this week, further supported crude oil,” stated Sycamore. The U.S. dollar index, which gauges the greenback’s strength relative to six counterparts, declined to a level not seen in nearly a week. A depreciated dollar results in lower oil prices for those holding alternative currencies. The risk profile of Middle Eastern oil supply has been heightened as the Israeli military commenced a ground offensive on Monday aimed at occupying Gaza City, according to reports.
In a notable development, U.S. and Chinese officials announced on Monday that they have established a framework agreement to transition the short-video application TikTok to ownership under U.S. control, marking a significant breakthrough in protracted negotiations spanning several months. Historical occurrences of alleviating U.S.-China trade friction have enhanced risk appetite and elevated expectations for oil demand.