Oil prices rose in Asian trading on Tuesday, extending recent gains as ongoing attacks on Russian energy infrastructure by Ukraine heightened concerns over potential supply disruptions.
The escalation comes after Russian forces launched a major offensive in southeastern Ukraine, including the city of Zaporizhzhia, following several weeks of Ukrainian strikes targeting Russian oil facilities.
Market sentiment also found support from a weaker U.S. dollar, as the greenback eased amid growing expectations that the Federal Reserve will reduce interest rates during its policy meeting later this week. By 21:54 ET (01:54 GMT), Brent crude for November delivery had risen 0.3% to $67.63 a barrel, while West Texas Intermediate climbed 0.3% to $63.21 a barrel.
Supply Fears Offset Broader Market Weakness
Ukraine intensified its offensive against Russia over the past two weeks, particularly after U.S.-brokered peace negotiations were viewed as largely inconclusive. Ukrainian forces have focused on disrupting Russian oil production, aiming to hinder Moscow’s capacity to fund military operations.
Meanwhile, U.S. President Donald Trump has advocated for additional sanctions targeting Russia’s oil sector, including measures against major buyers such as India and China. Earlier in August, India faced 50% trade tariffs over the issue. Trump also called on NATO, the European Union, and G7 nations to reduce Russian oil purchases and increase trade pressure on these countries.
Although global supply is expected to remain abundant in the coming months due to rising OPEC output and strong non-OPEC production, concerns over Russian supply disruptions have supported oil prices. Global demand remains subdued, particularly in China, where recovery has been slow over the past two years, while U.S. fuel consumption is expected to decline during the winter season.
Analysts at Bernstein warned that Brent could fall to $60 per barrel if supply continues to outpace demand, with the global oil surplus projected to reach 1.9 million barrels per day this quarter. The analysts noted that stricter sanctions on Russia remain the primary upside risk for oil markets.
Dollar Weakness and Fed Rate Expectations
A softer dollar in recent weeks has also provided support to oil prices. The greenback has weakened amid expectations that the Federal Reserve will reduce interest rates by at least 25 basis points during its upcoming policy session, reflecting some cooling in the labor market.
While the Fed’s forward guidance on rates remains uncertain due to persistent inflation, lower interest rates could stimulate economic activity and, in turn, bolster oil demand.
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