HG MARKETS:

Oil prices held near two-week highs on Monday as investors anticipated a potential U.S. Federal Reserve rate cut this week, which could boost economic growth and energy demand. At the same time, markets kept a close eye on geopolitical tensions that could disrupt supply from Russia and Venezuela.

The market is in a wait-and-see mode ahead of further updates on U.S. interest rates and the Ukraine peace talks. Any progress toward an agreement on Ukraine could boost Russian oil exports and, in turn, weigh on prices.

According to LSEG data, traders are assigning an 84% probability to a quarter-point rate cut at the Federal Reserve’s meeting on Tuesday and Wednesday. Still, recent comments from board members suggest the gathering could be one of the most contentious in years, sharpening investor attention on the Fed’s policy outlook and internal debate.

In Europe, Ukraine peace negotiations are advancing slowly, with disagreements over security assurances for Kyiv and the future of Russian-controlled territories still unresolved. U.S. and Russian officials also continue to clash over the peace plan proposed by the administration of President Donald Trump.

The strongest headwind for the oil price outlook is the possibility of a ceasefire, while prolonged damage to Russia’s energy infrastructure represents a major upside risk.

Analyst  expect oversupply concerns to materialize over time, particularly as Russian crude and refined products find ways around current sanctions. This may cause futures to gradually move toward $60 a barrel through 2026.

Meanwhile, the Group of Seven nations (G7) and the European Union are discussing replacing the current price cap on Russian oil with a comprehensive ban on maritime services, sources told Reuters — a move that would likely further restrict supplies from the world’s second-largest oil producer.

The United States has also intensified pressure on Venezuela — an OPEC member — carrying out strikes on vessels attempting to smuggle illegal drugs and raising the prospect of military action to remove President Nicolás Maduro.

Meanwhile, Chinese independent refiners have increased their purchases of sanctioned Iranian crude from onshore storage, using newly granted import quotas, trade sources and analysts said, helping to ease the existing supply surplus.