Oil prices rise as a combination of economic optimism in the U.S. and renewed geopolitical friction in Europe fuelled a market rally.
Brent crude climbed 1.3% (81 cents) to reach $63.48. Meanwhile, U.S. West Texas Intermediate (WTI) saw a sharper increase of 1.6% (94 cents), hitting $59.89.
Economic Drivers Fuel the Rally
The primary engine behind this surge is the expectation of monetary relief.
Recent data indicates a slowdown in U.S. employment. Consequently, investors are betting heavily that the Federal Reserve will cut interest rates to stimulate the world’s largest economy.
This sentiment has hammered the U.S. dollar. The greenback is poised for its tenth consecutive day of losses. A weaker dollar makes crude cheaper for holders of foreign currencies, effectively boosting global demand.
“I think the potential for a rate cut is overshadowing everything right now and driving crude prices up,” noted Phil Flynn, a senior analyst with Price Futures Group.
Geopolitical Deadlock Supports Oil Prices Rise
Beyond economics, the stalling of diplomatic efforts in Eastern Europe is keeping a floor under the market.
Representatives for U.S. President Donald Trump recently exited peace talks with the Kremlin without a breakthrough. Previously, traders had priced in the possibility of a quick end to the war, which could have flooded an oversupplied market with returning Russian barrels.
With negotiations stalled, that supply threat has diminished.
However, analysts warn that the ceiling for gains remains limited.
“War and politics, balanced against comfortable stocks, expected supply surplus, and OPEC’s market-share strategy, keep Brent in the $60–$70 range for now,” stated PVM analysts.
Physical Disruptions Continue
The conflict on the ground continues to threaten infrastructure.
A Ukrainian military source confirmed a fifth attack on the Druzhba pipeline in Russia’s Tambov region. Although operators claim flows to Hungary and Slovakia remain normal, the risks are escalating.
Furthermore, consultancy Kpler highlights a strategic shift in the conflict.
“Ukraine’s drone campaign against Russian refining infrastructure has shifted into a more sustained and strategically coordinated phase,” Kpler reported.
This campaign has consequences. Kpler added, “This has pushed Russian refining throughput down to around 5 million barrels per day between September and November… with gasoline hit hardest.”
The Oversupply Challenge
Despite the day’s gains, long-term headwinds persist.
U.S. crude inventories jumped by 574,000 barrels last week, defying analyst predictions of a draw. Simultaneously, Saudi Arabia has slashed its January official selling price to Asia to a five-year low, signaling a fierce battle for market share.
Reflecting this bearish outlook, Fitch Ratings lowered its price assumptions for 2025-2027, citing production growth that will likely outpace demand.
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