Oil prices set for weekly gain on Fed rate cut hopes and stalled Ukraine peace talks

Oil prices eased but were set for a weekly gain ⁠on Friday, supported by investors' expectations for stalled Ukraine peace ​talks in Moscow, a Federal Reserve ​interest rate cut and escalating US-Venezuela tensions.

The perception that progress on a peace plan for Ukraine was stalling supported prices because it lowered expectations of a deal restoring Russian oil ​flows. Previously, expectations of an end to the war had weighed on prices, as a deal would potentially lead to sanctions being lifted on Russia and more oil exports. Washington imposed sanctions on top Russian oil producers Rosneft and Lukoil in October.

Additional supply is likely to push down prices, which are already on track for an annual loss due to oversupply worries.

Brent, the benchmark for two-thirds of the world's oil, was trading 0.2 per cent lower at $63.25 per barrel at 11.45am on Friday. West Texas Intermediate, the gauge that tracks US crude, dipped 0.1 per cent, to $59.57 a barrel, but was up 1.5 per cent in the week.

“Crude oil is set to finish the week flat – curious, given there were several reasons to expect a rally,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

“Opec’s decision to pause its supply restoration strategy for the first three months of next year, the Trump administration’s softer climate stance, and US-Russia talks that yielded no real progress barely managed to entice buyers back in. Even typically supportive drivers – a weaker US dollar and softening Fed expectations – weren’t enough to spark a meaningful rally,

“WTI [West Texas Intermediate] remains trapped below the 50-day moving average, hugging the top of the August–November downtrend channel. The medium-term outlook stays timidly bearish.”

Giovanni Staunovo, an analyst at Swiss bank UBS, said while WTI is on the way to closing slightly higher than one week ago, Brent will probably close at similar levels to last week.

The market focus this week has been on the talks for a peace deal between Russia and Ukraine, but so far no deal has emerged, he added.

Crude has also been supported by growing expectations that the US Federal Reserve will cut interest rates again in December, which would provide a boost to both the economy and energy demand.

The markets are currently pricing in more than 85 per cent probability for a 25 basis points December rate cut. If this materialises, it should weaken the dollar further and provide support to oil prices as dollar-denominated commodities get cheaper, according to Vijay Valecha, chief investment officer of Century Financial.

Supply factors remain in focus.