The price of oil rose by 0.85% amid news that the United States has revised its position on Ukraine's retaliatory actions against Russia. However, further price increases were limited by concerns about oil demand in China and the latest forecasts from the International Energy Agency (IEA) and OPEC, which indicated a slowdown in global demand growth.
Yesterday, Russia launched the largest airstrike in Ukraine in almost three months. Meanwhile, President Joe Biden's administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russia. The change comes largely in response to Russia's deployment of North Korean ground troops to supplement its own forces. The move also comes two months before President-elect Donald Trump takes office on Jan. 20. Meanwhile, the Kremlin sharply criticized such a decision and accused the Biden administration of escalating the war. Experts have warned that if Ukraine increases attacks on Russia's oil infrastructure, this could lead to further increases in oil prices.
Investors are also concerned about the pace and scale of interest rate cuts by the Fed, which has created uncertainty in global financial markets. Fed funds futures now implement just 77 basis points worth of easing by end-2025. According to the CME FedWatch Tool, markets see a 65.3% probability of a 0.25% rate cut in December (compared to 76.8% a month ago). A slowdown in the expected reduction in interest rates may negatively affect economic growth, which will limit demand for fuel.