Crude Oil Holds Near Two-Week Peak as Fed Outlook and Supply Risks Shape Trade

Key Moments

Oil Prices Steady Near Recent Highs

Oil futures traded close to two-week highs on Monday as investors positioned for a possible U.S. Federal Reserve interest rate cut that could support economic activity and fuel demand. Meanwhile, traders also monitored geopolitical developments that could disrupt supplies from Russia and Venezuela.

Both Brent and West Texas Intermediate ended Friday at their strongest closing levels since November 18, and as a result, they continued a steady upward trend in prices.

Oil Just Hit a Two-Week High — But It's Not What You Think

– Oil rallies aren't just about drilling rigs anymore.
– Rate cuts signal growth, growth demands energy, energy prices respond.
– Geopolitical supply squeezes meet monetary stimulus perfectly right now.
– Markets are… pic.twitter.com/4VxwTu6T8d

— The Zeno Report (@ZenoReport) December 7, 2025

Fed Meeting and Policy Uncertainty

According to LSEG data, traders assigned an 84% probability to a 25-basis-point reduction in U.S. interest rates at the Federal Reserve’s meeting scheduled for Tuesday and Wednesday. Although markets already absorbed much of that expectation, recent comments from Fed officials suggest the gathering could become one of the most contentious in years. Consequently, investors are watching the central bank’s policy trajectory and internal debate more closely.

Ukraine Peace Efforts and Potential Supply Swings

In Europe, diplomats reported slow progress in efforts to end the war in Ukraine, as disagreements persist over security guarantees for Kyiv and the future of territories under Russian control. U.S. and Russian officials were also reported to hold differing interpretations of a peace plan proposed by the administration of U.S. President Donald Trump.

ANZ analysts highlighted the potential for a wide swing in oil flows tied to the outcome of these negotiations, stating in a client note: “The various potential outcomes from Trump’s latest push to end the war could release a swing in oil supply of more than 2 million barrels per day.”

Commonwealth Bank of Australia analyst Vivek Dhar framed the conflict dynamics in terms of price risks, noting that a cessation of hostilities could weigh on prices, while lasting impairment to Russian energy facilities could tighten the market.

He wrote in a client note: “We think oversupply concerns will eventually be realised, especially as Russian oil and refined product flows eventually circumvent existing sanctions, prompting futures to gradually track towards $60/bbl through 2026.”

Policy Shifts Toward Russian and Venezuelan Exports

Group of Seven nations and the European Union were reported to be discussing a move away from the current price cap on Russian oil exports toward a comprehensive ban on maritime services for those shipments, according to people cited by Reuters. Such a measure would be expected to further restrict exports from Russia, the world’s second-largest oil producer.

At the same time, the United States has increased pressure on Venezuela, a member of the Organization of the Petroleum Exporting Countries. Actions have included strikes on vessels Washington said were attempting to traffic illegal narcotics from the country, as well as public discussion of possible military steps aimed at removing President Nicolas Maduro.

Chinese Buying of Iranian Crude Eases Glut

On the demand side, Chinese independent refiners have been boosting purchases of Iranian crude under sanctions, drawing from onshore storage and utilizing newly granted import quotas, according to trade sources and analysts. This activity has been reducing an existing surplus in supply.