West Texas Intermediate (WTI) futures on NYMEX increased by 0.25% to near $59.00 during Thursday’s Asian trading session. Ukraine’s attack on Russia’s Druzhba oil pipeline, which supplies energy products to Hungary and Slovakia, has heightened supply concerns amid ongoing sanctions on major Russian oil companies like Rosneft and Lukoil.
The oil price rose on Wednesday due to the failed peace talks between the US and Russia. The Federal Reserve is anticipated to announce an interest rate cut of 25 basis points to 3.50%-3.75% next week, a move that is expected to influence oil demand positively.
The Probability of Interest Rate Cuts
According to the CME FedWatch tool, there is an 89% probability of the Fed cutting rates in December. This would mark the third consecutive rate reduction by the Fed.
WTI, a type of crude oil recognised for its low gravity and sulfur content, is traded on international markets, sourced from the US, and is refined with ease. Supply and demand, global growth, political instability, sanctions, and the value of the US Dollar are all factors that drive WTI’s price.
Weekly inventory data from the American Petroleum Institute and Energy Information Agency, along with OPEC’s production decisions, also significantly impact WTI oil prices.
Given the escalation in Ukraine and the attack on the Druzhba pipeline, we see a clear signal of supply-side risk returning to the market. This isn’t just noise; we remember how crude prices shot past $120 a barrel in 2022 when similar supply fears first emerged. Traders should therefore view the current move toward $59 not as a peak, but as a potential base for a continued climb in the coming weeks.
Geopolitical Risks and Market Dynamics
The failure of US-Russia peace talks further cements the idea that this geopolitical risk premium is not going away soon. This persistent uncertainty is now combined with hard data showing a tighter market, as the latest Energy Information Administration (EIA) report showed a surprise inventory draw of 4.2 million barrels. This contrasts sharply with analyst expectations for a small build, suggesting demand is already outstripping supply.
Looking ahead, the Federal Reserve’s expected interest rate cut next week is the key demand-side catalyst. With an 89% probability of a cut, this will likely weaken the US dollar and make oil cheaper for foreign buyers, further boosting consumption. This will be the third rate cut in a row, a sustained effort to invigorate an economy that has been sluggish for much of 2025.
This monetary stimulus is happening just as global demand forecasts are being revised upwards, with recent projections for 2026 global consumption now topping 104.5 million barrels per day. Therefore, derivative strategies should lean bullish, such as buying call options to capture upside potential from both supply shocks and strengthening demand. We should consider any price dips before the Fed meeting as potential entry points for long positions.
