Oil prices flat with focus on Russia disruptions and Fed meeting

SINGAPORE: Global oil prices were little changed in early trade on Tuesday, with traders balancing fears of fresh supply disruptions from Russia against optimism over potential US interest rate cuts that could lift fuel demand.

Brent crude futures inched up 4 cents to $67.48 a barrel by 0000 GMT, while US West Texas Intermediate (WTI) crude rose 2 cents to $63.32. The modest gains followed a positive session on Monday when Brent settled 45 cents higher at $67.44 and WTI ended 61 cents up at $63.30.

Fears of Russian supply disruption

The stability in prices came as markets reacted to a recent wave of Ukrainian drone strikes on Russian refineries, which raised concerns over potential supply disruptions from one of the world’s top oil producers. Russia accounts for more than 10 percent of global oil output, and any prolonged disruption could tighten supplies.

“Heightened fears of supply disruptions from Russia, a key producer accounting for over 10% of global oil output, is helping oil prices,” said Tony Sycamore, market analyst at IG, in a client note.

Ukraine has intensified its attacks on Russia’s energy infrastructure in an attempt to weaken Moscow’s war capabilities, while peace talks between the two sides remain stalled.

Markets eye Fed decision

Traders are also closely watching the upcoming US Federal Reserve meeting on September 16-17, where the central bank is widely expected to cut interest rates. Lower borrowing costs typically boost economic activity and energy demand.

“A weaker US dollar, driven by expectations of a Federal Reserve rate cut this week, further supported crude oil,” Sycamore added.

The US dollar index, which tracks the greenback against six major currencies, slipped to its lowest level in nearly a week, making oil cheaper for buyers using other currencies.

Geopolitical tensions in the Middle East

Adding to the market’s caution, the Israeli military launched a ground offensive on Monday to take control of Gaza City, Axios reported citing Israeli officials. The development has added to the risk profile of Middle Eastern oil supplies.

In a separate development that could influence market sentiment, US and Chinese officials announced on Monday that they had reached a framework agreement to shift short-video platform TikTok to US-controlled ownership. Previous signs of easing US-China trade tensions have often lifted investor confidence and strengthened oil demand outlooks.