Onome Amuge
Oil prices gained on Tuesday morning as intensifying hostilities between Russia and Ukraine raised the prospect of further supply disruptions, while investors awaited key U.S. jobs data that could shape expectations for Federal Reserve interest rate cuts.
Brent crude, the international benchmark, rose 37 cents, or 0.54 per cent, to $68.52 a barrel, while U.S. marker West Texas Intermediate climbed $1.01, or 1.58 per cent, to $65.02. WTI did not settle on Monday owing to the Labor Day holiday.
“Oil prices are drawing short-term strength from the prospect of imminent Fed easing, which is reviving demand sentiment,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
The move comes ahead of a raft of U.S. labour data due this week, with investors eyeing the Federal Reserve’s September meeting for confirmation that softer economic conditions, highlighted by weaker-than-expected payroll figures in July could accelerate monetary easing.
On the supply side, the conflict in eastern Europe has once again upended expectations. Ukrainian drone strikes in recent weeks have shuttered facilities representing about 17 per cent of Russia’s oil-processing capacity, or 1.1mn barrels a day, according to Reuters calculations.
Ukraine has intensified its campaign against Russian energy infrastructure, targeting refineries and pipelines, while Moscow has stepped up attacks on Ukraine’s power and transport systems. President Volodymyr Zelenskiy signalled on Sunday that strikes deep into Russian territory would continue.
“Ongoing risks to energy infrastructure in Russia remain high,” said Daniel Hynes, senior commodity strategist at ANZ.
Geopolitical tensions have also been sharpened by Beijing’s push for a new global order. At a summit with Russian and Indian leaders, Chinese President Xi Jinping called for a security and economic framework prioritising the “Global South,” challenging the U.S.-led system. China and India are the biggest buyers of Russian crude.
Trade frictions remain a risk factor for markets. Washington has imposed tariffs on Indian crude purchases from Russia but has spared China. Analysts warn the combination of tariffs and oversupply could weigh on longer-term prices, despite near-term strength from geopolitical disruptions.
Attention is now turning to the September 7 meeting of OPEC and its allies, where members are expected to leave output unchanged after unwinding production cuts earlier this year.
“The scale of the surplus through next year means it’s unlikely the group will bring additional supply onto the market. The bigger risk is OPEC+ deciding to reinstate supply cuts, given concerns about a surplus,” analysts at ING said.
