Markets are focused on the Federal Reserve decision and the Russia-Ukraine situation; geopolitical premiums have boosted oil prices to a two-week high.
2025-12-06 08:17:25
Oil prices rose significantly on Friday, with Brent crude settling at $63.74 a barrel and WTI crude at $60.14 a barrel, both climbing to their highest levels in nearly two weeks since November 18. This week, both benchmark contracts saw their second consecutive weekly gain.
The core driver of this oil price increase is the "dual-engine" combination of macroeconomic monetary policy expectations and geopolitical supply risks.
On the macro front, expectations of a Federal Reserve rate cut have become the main driver, with the market's probability of the Fed cutting rates by 25 basis points at its meeting next week (December 9-10) rising to 87%. A rate cut is expected to lower borrowing costs and stimulate economic growth, thereby directly boosting future oil demand. This expectation stems primarily from the latest data showing that US consumer spending growth slowed in September, indicating weakening economic momentum and reinforcing the need for the Fed to take action to support the economy.
On the supply side, multiple geopolitical risks have raised concerns, including uncertainty surrounding Russian supply and risks associated with Venezuelan production.
This week's peace talks in Moscow on the Ukraine crisis failed to yield a breakthrough, while the G7 is discussing a stricter "comprehensive maritime service ban" on Russian oil exports to replace the existing price cap mechanism. Any move that could restrict the flow of Russian crude into the market could trigger concerns about supply shortages.
However, the U.S. and Ukrainian officials have reached an agreement on a "framework for a security arrangement." According to a statement from the U.S. State Department, this progress was made after two days of talks, and consultations are scheduled to continue on Saturday. The talks, conducted by a U.S. special envoy and senior Ukrainian national security and military officials, focused on building a "deterrent capability" needed to maintain lasting peace.
Russian presidential aide Yuri Ushakov said that Russia is waiting for the United States to share the results of its negotiations with the head of the Ukrainian negotiating delegation, Rustem Umerov, secretary of the National Security and Defense Council of Ukraine.
During the meeting between the leaders of Russia and India, the two sides discussed a number of areas of cooperation. Russian Presidential Press Secretary Dmitry Peskov stated that selling Russian oil to India would benefit both Moscow and New Delhi.
In addition, the market is preparing for possible U.S. military action against Venezuela, which could jeopardize the country’s crude oil exports of about 1.1 million barrels per day, thereby impacting global supply.
The market is currently caught between two opposing forces: the positive factor of "lack of progress in the Ukraine peace talks" and the negative factor of "OPEC+ production remaining resilient." This has resulted in a seemingly calm trading environment, but with underlying undercurrents.
Analysts at Ritterbusch & Associates believe Putin appears unwilling to relinquish any strong territorial claims, especially given Trump's apparent inclination towards him. Therefore, drone attacks on Russian oil infrastructure, including refineries and storage facilities, are likely to resume. "This provides support for oil prices in the short term, but in the longer term, oil production from other regions is expected to eventually pull crude prices back to $55-59 per barrel. Fundamentals will always ultimately prevail over time."
Fitch analysts stated that conflict-related risk premiums are offsetting the impact of the supply glut that has been accumulating since the fourth quarter of 2025, which is expected to continue into the new year. Despite increasingly bearish fundamentals in recent months, both oil prices have shown considerable resilience.
ANZ Bank believes that oil prices will experience three phases: support from geopolitical risk premiums, suppression from supply and demand fundamentals, and a final breakthrough driven by economic growth. Concerns about the ongoing mutual attacks on energy infrastructure by Russia and Ukraine will keep Brent crude prices above $60 per barrel, with prices expected to reach $62 per barrel by the end of the year. Lower refinery utilization rates and increased OPEC+ production will push up global crude oil inventories, potentially keeping prices below $65 per barrel in the first half of 2026. A global economic recovery is expected to support oil prices in the second half of 2026, subsequently pushing prices towards $70 per barrel.
The core driver of this oil price increase is the "dual-engine" combination of macroeconomic monetary policy expectations and geopolitical supply risks.
On the macro front, expectations of a Federal Reserve rate cut have become the main driver, with the market's probability of the Fed cutting rates by 25 basis points at its meeting next week (December 9-10) rising to 87%. A rate cut is expected to lower borrowing costs and stimulate economic growth, thereby directly boosting future oil demand. This expectation stems primarily from the latest data showing that US consumer spending growth slowed in September, indicating weakening economic momentum and reinforcing the need for the Fed to take action to support the economy.
On the supply side, multiple geopolitical risks have raised concerns, including uncertainty surrounding Russian supply and risks associated with Venezuelan production.
This week's peace talks in Moscow on the Ukraine crisis failed to yield a breakthrough, while the G7 is discussing a stricter "comprehensive maritime service ban" on Russian oil exports to replace the existing price cap mechanism. Any move that could restrict the flow of Russian crude into the market could trigger concerns about supply shortages.
However, the U.S. and Ukrainian officials have reached an agreement on a "framework for a security arrangement." According to a statement from the U.S. State Department, this progress was made after two days of talks, and consultations are scheduled to continue on Saturday. The talks, conducted by a U.S. special envoy and senior Ukrainian national security and military officials, focused on building a "deterrent capability" needed to maintain lasting peace.
Russian presidential aide Yuri Ushakov said that Russia is waiting for the United States to share the results of its negotiations with the head of the Ukrainian negotiating delegation, Rustem Umerov, secretary of the National Security and Defense Council of Ukraine.
During the meeting between the leaders of Russia and India, the two sides discussed a number of areas of cooperation. Russian Presidential Press Secretary Dmitry Peskov stated that selling Russian oil to India would benefit both Moscow and New Delhi.
In addition, the market is preparing for possible U.S. military action against Venezuela, which could jeopardize the country’s crude oil exports of about 1.1 million barrels per day, thereby impacting global supply.
The market is currently caught between two opposing forces: the positive factor of "lack of progress in the Ukraine peace talks" and the negative factor of "OPEC+ production remaining resilient." This has resulted in a seemingly calm trading environment, but with underlying undercurrents.
Analysts at Ritterbusch & Associates believe Putin appears unwilling to relinquish any strong territorial claims, especially given Trump's apparent inclination towards him. Therefore, drone attacks on Russian oil infrastructure, including refineries and storage facilities, are likely to resume. "This provides support for oil prices in the short term, but in the longer term, oil production from other regions is expected to eventually pull crude prices back to $55-59 per barrel. Fundamentals will always ultimately prevail over time."
Fitch analysts stated that conflict-related risk premiums are offsetting the impact of the supply glut that has been accumulating since the fourth quarter of 2025, which is expected to continue into the new year. Despite increasingly bearish fundamentals in recent months, both oil prices have shown considerable resilience.
ANZ Bank believes that oil prices will experience three phases: support from geopolitical risk premiums, suppression from supply and demand fundamentals, and a final breakthrough driven by economic growth. Concerns about the ongoing mutual attacks on energy infrastructure by Russia and Ukraine will keep Brent crude prices above $60 per barrel, with prices expected to reach $62 per barrel by the end of the year. Lower refinery utilization rates and increased OPEC+ production will push up global crude oil inventories, potentially keeping prices below $65 per barrel in the first half of 2026. A global economic recovery is expected to support oil prices in the second half of 2026, subsequently pushing prices towards $70 per barrel.
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