Oil prices edged up nearly 1% to a two-week high on Friday (December 5th) amid growing expectations that the US Federal Reserve will cut interest rates next week, which could boost economic growth and energy demand, as well as geopolitical uncertainty that could limit supply from Russia and Venezuela.

Brent crude futures rose 49 cents, or 0.8%, to $63.75 a barrel, while US West Texas Intermediate (WTI) crude rose 41 cents, or 0.7%, to $60.08.

This was the highest close for both crude benchmarks since November 18th.

For the week, Brent rose about 1% and WTI rose about 3%, marking the second consecutive weekly gain for both contracts.

Investors digested the US inflation report and readjusted expectations that the Fed will cut interest rates at its December 9-10 meeting.

US consumer spending rose modestly in September after three straight months of solid gains, indicating a loss of economic momentum late in the third quarter as a sluggish labor market and rising cost of living dampened demand.

Traders are pricing in an 87% chance that the Fed will lower borrowing costs by 25 basis points next week, according to the CME Group's FedWatch Tool.

Separately, top Chinese and US officials met on Friday to discuss trade, including ongoing efforts to implement a deal in their trade war.

In other trade news, US President Donald Trump said he would meet with the leaders of Mexico and Canada to discuss trade issues on Friday after they gather in Washington for the 2026 World Cup draw.

Any talks that could ease trade tensions between the US and other countries could boost economic growth and energy demand.

INVESTORS FOCUS ON RUSSIAN AND VENEZUELA PRODUCTION

Investors are also focusing on news from Russia and Venezuela to determine whether oil supplies from the two sanctioned OPEC+ members will increase or decrease in the future.

The failure of US talks in Moscow to achieve a significant breakthrough on the war in Ukraine has driven up oil prices so far this week.

"The lack of progress in the Ukraine peace talks provides a bullish backdrop, but on the other hand, resilient OPEC production provides bearish support. These two opposing forces make trading appear quiet," said Tamas Vargas, oil market analyst at PVM.

The Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a complete ban on maritime services in an effort to reduce oil revenues that help finance Russia's war in Ukraine, according to six sources familiar with the matter.

OPEC+ includes the Organization of the Petroleum Exporting Countries and allies like Russia. Any deal that lifts sanctions on Russia, the world's second-largest crude producer after the US, could increase the amount of oil available on the global market.

Russian President Vladimir Putin, on his first visit to New Delhi since Russia's invasion of Ukraine in 2022, on Friday offered India uninterrupted fuel supplies, prompting a cautious response even though he and Indian Prime Minister Narendra Modi agreed to expand trade and defense ties.

State-owned oil refiners Indian Oil Corp. and Bharat Petroleum Corp. have been ordering Russian oil from non-sanctioned suppliers since January due to increasing discounts, according to trade sources familiar with the matter.

A Ukrainian drone attack caused a fire at the Russian port of Temryuk on the Sea of ​​Azov, the local emergency center said on Friday. Temryuk handles liquefied petroleum gas (LPG), oil products and petrochemicals, as well as grain and other bulk food commodities.

Markets are also bracing for a potential US military strike on Venezuela after Trump reiterated that the US would take immediate action to stop Venezuelan drug traffickers on land.

Rystad Energy said in a note that the move could jeopardize Venezuela's crude oil production of 1.1 million barrels per day, most of which is shipped to China. (alg)

Source: Reuters.com