(RTTNews) – Crude oil rose on Monday supported by a positive economic outlook driven by expectations of a rate cut by the US Federal Reserve and a rally on Wall Street that signaled more demand growth. The surge in oil prices came despite increased pressure over a US peace proposal to end the Russia-Ukraine war.
WTI crude oil for January delivery was last seen trading up $0.73 (or 1.26%) at $58.79 a barrel.
Last Friday, Federal Reserve Bank of New York President John Williams indicated that he expected the Fed to lower interest rates due to ongoing weakness in the labor market.
Today, Federal Reserve Governor Christopher Waller said he favors a rate cut in December due to concerns about the labor market.
Renewed optimism about a rate cut boosted major US indices, signaling confidence in the economic outlook and resulting in fresh energy demand, which in turn lifted crude oil prices.
The Russia-Ukraine war, which began in 2022, has passed day number 1,360 in which each side has attacked the other’s energy and oil installations and infrastructure, disrupting the flow of oil to markets.
Backed by the initial success of the Gaza peace plan recommended by US President Donald Trump, last week the Trump administration came up with a 28-point peace proposal for Russia and Ukraine.
The principles of the agreement were criticized as being highly favorable to Russia as it forced Ukraine to give up territories captured by Russia.
Ukrainian President Volodymyr Zelensky has said that he is amenable to any peace plan only if it does not violate Ukraine’s national interests.
After this, America and Ukraine held talks in Geneva, Switzerland last week.
Yesterday, the two countries jointly announced that they were working on a “revised and updated peace framework” to end the more than four-year-old war. However, neither country shared any details of the content of the plans.
Talks are still going on today to finalize a draft proposal soon.
Pointing to the development, Trump said, “Something good could happen.”
Stock markets were cheered by these developments in peace talks and downward pressure was felt on oil prices.
The US has imposed sanctions on Russian oil exports, targeting two big oil companies – Rosneft and Lukoil.
Trump’s threat of “penalty tariffs” on countries that buy oil from Russia has started to take its toll as China, India and Turkey (the three major buyers) are starting to look away from Russia for their oil needs.
The end of the Russia-Ukraine war could result in sanctions being lifted and free flow of oil from both countries into the market.
In recent days, the dollar index has strengthened while investors continue to assess divergent comments from several US Federal Reserve officials on additional rate cuts. The strength of the US dollar is impacting oil prices.
A broader bearish trend amid concerns over weak demand growth due to the OPEC+ cartel’s production increase targets as well as a rising US dollar has put pressure on oil prices.
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