Oil prices held near two-week highs on Monday (December 8th) as investors anticipated a possible US Federal Reserve interest rate cut this week to boost economic growth and energy demand, while monitoring geopolitical risks threatening Russian and Venezuelan supplies.

Brent crude futures fell 25 cents, or 0.4%, to $63.50 a barrel at 09:22 GMT, while US West Texas Intermediate crude was at $59.83, also down 25 cents, or 0.4%.

Both contracts closed Friday's trading session at their highest levels since November 18th.

"The market is in wait-and-see mode" ahead of further news on US interest rates and the Ukraine peace talks, said Tamas Varga, oil market analyst at PVM. "If an agreement is reached soon regarding Ukraine, Russian oil exports will increase and put pressure on oil prices," he said.

The market is pricing in an 84% chance of a quarter-point rate cut at the Fed's meeting on Tuesday and Wednesday, according to LSEG data. However, comments from board members suggest the meeting is likely to be one of the most divisive in recent years, increasing investor focus on the bank's policy direction and internal dynamics.

SLOW PROGRESS IN UKRAINE

In Europe, progress in Ukraine peace talks remains slow, with disputes over security guarantees for Kyiv and the status of Russian-occupied territories still unresolved. US and Russian officials also have differing views on the peace proposal put forward by US President Donald Trump's administration.

"The range of potential outcomes of Trump's latest push to end the war could trigger oil supply fluctuations of more than 2 million barrels per day," ANZ analysts said in a client note.

Commonwealth Bank of Australia analyst Vivek Dhar said a ceasefire is the main downside risk to the oil price outlook, while continued damage to Russia's oil infrastructure is a significant upside risk.

"We believe oversupply concerns will ultimately materialize, especially as Russian oil and refined product flows eventually circumvent existing sanctions, driving futures prices to gradually move toward $60/bbl through 2026," Dhar said in a client note.

NEW RESTRICTIONS ON RUSSIAN EXPORTS?

Meanwhile, the G7 and the European Union are in talks to replace price caps on Russian oil exports with a complete ban on maritime services, sources familiar with the matter told Reuters, which would likely further restrict supply from the world's second-largest oil producer.

The US has also increased pressure on Venezuela—part of the Organization of the Petroleum Exporting Countries—including attacks on ships suspected of attempting to smuggle drugs from the OPEC member, as well as talk of military action to oust President Nicolas Maduro.

Elsewhere, independent Chinese refiners have increased purchases of sanctioned Iranian oil from onshore storage tanks using newly issued import quotas, according to trade sources and analysts, easing the supply glut. (alg)

Source: Reuters.com