Oil futures decreased from their highest levels in weeks as traders took profits while anticipating a Federal Reserve meeting later this week for guidance on potential further rate cuts. However, declines were moderated by concerns over supply disruptions in the event of additional U.S. sanctions on major suppliers, such as Russia and Iran. Brent crude futures fell by 29 cents, or 0.4%, to $74.20 a barrel by 07:46 GMT, after settling at their highest level since November 22 on Friday. Meanwhile, U.S. West Texas Intermediate crude dropped by 36 cents, or 0.5%, to $70.93 a barrel, following its highest settlement level since November 7 in the previous session.
“After last week’s 6% rally, and with crude oil trading near the top of recent range highs, we are likely seeing some light profit-taking,” said IG market analyst Tony Sycamore. “It is also probable that many trading books at banks and funds closed positions at the end of last week, reducing their appetite for trades during the festive season.” Oil prices received support from new European Union sanctions on Russian oil imposed last week and expectations of tighter sanctions on Iranian supply, Sycamore added.
U.S. Treasury Secretary Janet Yellen told Reuters on Friday that the U.S. is considering further sanctions on “dark fleet” tankers and may impose sanctions on Chinese banks to reduce Russia’s oil revenue and its access to foreign supplies to support its war in Ukraine. Fresh U.S. sanctions on entities trading Iranian oil are already pushing prices for crude sold to China to their highest levels in years. The incoming Trump administration is expected to increase pressure on Iran. Additionally, oil prices were bolstered by key interest rate cuts from central banks in Canada, Europe, and Switzerland last week, alongside expectations that the Fed will cut rates this week.
The Fed is anticipated to lower interest rates by a quarter of a percentage point at its December 17-18 meeting, which will also provide an updated outlook on how much further officials plan to reduce rates in 2025 and possibly into 2026. Lower interest rates can stimulate economic growth and increase demand for oil. Nevertheless, forecasts of ample oil supply in 2025 by the International Energy Agency and CNPC’s predictions of declining oil demand in China—the world’s second-largest consumer after consumption peaked in 2023—are factors that may continue to weigh on global oil markets.
Recent economic data released on Monday indicated a slight acceleration in China’s industrial output growth in November, although retail sales were disappointing. This keeps alive calls for Beijing to enhance consumer-focused stimulus as policymakers prepare for potential additional U.S. trade tariffs under a second Trump administration. “We continue to expect more policy easing in 2025, and we believe fiscal stimulus will play a significant role, with increased emphasis on consumption,” Goldman Sachs analysts noted in a report on China.
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