Oil steady as market weighs supply risk from attacks on Russian refineries

Synopsis

Oil prices remained stable after a previous session increase, influenced by concerns over potential Russian supply disruptions due to Ukrainian refinery attacks. Market sentiment was also affected by the U.S. Federal Reserve's anticipated interest rate cut, which could stimulate fuel demand. Geopolitical tensions in the Middle East and progress in U.S.-China trade talks further contributed to market dynamics.

Oil prices held steady in early trade on Tuesday after rising in the previous session, as market participants contemplated potential supply disruption from Russia after Ukrainian drone attacks on its refineries.

Brent crude futures edged up 4 cents to $67.48 a barrel by 0000 GMT while U.S. West Texas Intermediate crude was at $63.32, up 2 cents. On Monday, Brent settled up 45 cents at $67.44 while WTI settled 61 cents higher at $63.30.

Ukraine has intensified attacks on Russia's energy infrastructure in an attempt to impair Moscow's war capability, as talks to end their conflict have stalled.

"Heightened fears of supply disruptions from Russia, a key producer accounting for over 10% of global oil output" is helping oil prices, IG market analyst Tony Sycamore said in a client note.

U.S. Treasury Secretary Scott Bessent on Monday said the government would not impose additional tariffs on Chinese goods to encourage China to halt purchases of Russian oil unless European countries hit China and India with steep duties of their own.

Investors are also watching out for the U.S. Federal Reserve's September 16-17 meeting at which the bank is widely expected to cut interest rates. Lower borrowing costs could boost fuel demand.

"A weaker U.S. dollar, driven by expectations of a Federal Reserve rate cut this week, further supported crude oil," Sycamore said.

The U.S. dollar index, which measures the greenback's strength against six peers, slipped to a nearly one-week low. A weaker dollar makes oil less expensive for holders of other currencies.

Adding to the risk profile of Middle Eastern oil supply, the Israeli military launched a ground offensive on Monday to occupy Gaza City, Axios reported citing Israeli officials.

Meanwhile, U.S. and Chinese officials said on Monday they have reached a framework agreement to switch short-video app TikTok to U.S.-controlled ownership in a rare breakthrough in months-long talks.

Previous instances of easing U.S.-China trade tension have boosted risk sentiment and increased oil demand expectations.

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