Crude oil prices started the week with gains following the U.S. Federal Reserve chairman’s speech last Friday, which revived hopes for more rate cuts later this year as well as Ukrainian attacks on Russian energy infrastructure.
At the time of writing, Brent crude was trading at $67.85 and West Texas Intermediate was trading at $63.79 per barrel, after adding almost 3% last year amid vanishing chances for a quick end to the war in Ukraine.
After three attacks on the Druzhba pipeline that carries crude from Russia to Hungary and Slovakia, the Ukrainian forces stepped up their attacks on Russia as well, targeting a nuclear power plant and the fuel export terminal in Us-Luga on Sunday. The risk of supply disruption helped push oil prices higher.
In what is widely assumed to be his last speech, Jerome Powell indicated the U.S. central bank was ready for another rate cut in September. This immediately injected a large dose of optimism in commodity markets, with the probability of a rate cut rising to 85% from 72% before the speech, according to an ING commodity report.
“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in Jackson Hole, adding that inflation risks were still “tilted to the upside,” and that there were “clearly visible” signs of inflationary pressure from the tariffs.
Meanwhile, “Uncertainty prevails as US President Trump once again threatens to impose tougher sanctions on Russia unless there’s a deal to end the war,” ING commodity analysts said in a note earlier today. They went on to point out that the oil market’s reaction to these threats was muted after “the lack of action taken by the US administration against Russia following the Trump-Putin summit.”
An additional factor for price swings comes into effect later this week, when the additional 25% tariffs on Indian imports—a punishment for India continuing to buy Russian oil—kick in.
By Irina Slav for Oilprice.com
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