Oil prices have found support after Ukrainian attacks on Russian oil facilities raised the prospect of oil supply disruption. Hopes of increased growth after the Fed cuts rates are also fuelling oil bulls.
Brent oil was trading at $68.29 at the time of writing.
The latest strike on Russian oil facilities is unlikely to cause major disruption in isolation; rather, if this turns out to be a tactic employed by Ukraine on an ongoing basis, the impact on Russian output could impact global oil supply.
“In recent days, crude oil prices have seen a sharp increase, rising more than one dollar per barrel, following a series of Ukrainian attacks targeting ports and refineries in Russia,” said Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS.com.
“These actions could reduce the global oil supply if they continue to damage refining capacity, the state-owned company Transneft warned. Analysts note that a significant amount of capacity has already been lost, about 300,000 barrels per day, which could translate into sustained upward pressure on international markets.
Like all financial markets, the Federal Reserve is also providing support for oil as traders factor in the potential for a growth boost should the Fed cut rates during the rest of this year.
“Another factor capturing investors’ attention is the upcoming Federal Reserve decision on interest rates. If the Fed decides to lower rates or adopt a more accommodative stance, it could stimulate economic growth, which in turn would boost fuel demand,” Di Giacomo said.