Oil prices were poised to finish the week nearly 2% higher on Friday, buoyed by growing expectations of an interest rate cut from the Federal Reserve, rising geopolitical tensions between the United States and Venezuela, and renewed uncertainty stemming from stalled peace negotiations in Moscow.
It marks a second consecutive week of gains for the market. By 3:20 pm AEDT (4:20 am GMT), crude prices were little changed at the open. Brent crude eased 13 cents, or 0.2%, to US$63.13 per barrel, while U.S. West Texas Intermediate slipped 17 cents, or 0.3%, to US$59.52 per barrel.
Both benchmarks had settled around 1% higher in the previous session.
Analysts at ANZ pointed to ongoing diplomatic efforts over the Russia-Ukraine conflict as a major swing factor for the oil market.
"The peace plan presented to Russia and Ukraine presents the single biggest variable to the outlook for the oil market. The various potential outcomes from President Trump’s latest push to end the war could release a swing in oil supply of more than 2mb/d.
"We see three possible scenarios playing out. 1) no peace deal, status quo. Russia and Ukraine continue to attack each other’s energy infrastructure. Fears of supply tightness would ultimately keep Brent crude above USD60/bbl.
"However, further upside would be limited as supply outpaces demand in 2026, pushing the market into surplus. 2) no peace deal, sanction threats increase. Amid fears of losing access to U.S. financial systems, buyers of Russian crude withdraw.
"This could see up to 1mb/d of oil disrupted. 3) a peace deal is reached. This would likely lead to the removal of US sanctions on Russian oil companies, freeing up the flow of Russian crude."
Market sentiment was supported by optimism of further rate cuts, with the CME Group FedWatch Tool indicating an 88.2% probability of a 25-basis-point rate cut at next week's Federal Reserve policy meeting.
A rate reduction would be expected to spur economic activity and bolster demand for fuel.
Meanwhile, geopolitical tensions continued to simmer as markets prepared for the possibility of a U.S. military move into Venezuela. President Donald Trump said late last week that the United States would begin taking action on land “very soon” to curb Venezuelan drug trafficking networks.
Oil prices also found support from the failure of U.S. talks in Moscow to produce meaningful progress toward ending the war in Ukraine, a diplomatic outcome that could have paved the way for Russian crude to re-enter global markets more freely.
These supportive factors offset concerns about a mounting supply surplus.
In a sign of softening demand conditions in Asia, Saudi Arabia cut its January Arab Light crude selling prices to the region to their lowest level in five years, according to a document reviewed by Reuters on Thursday.
