WASHINGTON (dpa-AFX) - Crude oil moved sharply higher on Monday amid brewing Middle East tensions and the heightening Russia-Ukraine war alongside the US Federal Reserve's monetary policy meeting beginning tomorrow even as softening demand concerns surface.
WTI Crude Oil for October delivery was last seen trading up by $0.58 (or 0.93%) at $63.27 per barrel.
Starting to unwind the 1.65 million barrels per day in cuts ahead of schedule, in their virtual meeting last Sunday, the OPEC+ alliance opted to further increase oil production by 137,000 bpd in October.
If this were to be repeated month on month, then after a year, the second tranche will be eliminated. The alliance had already eliminated the first of 2.2 million barrels of these voluntary cuts a month before.
Traders feel that gains made in Chinese inventories soaked up surplus from the markets until now.
In the fourth quarter of 2025, oil demand is expected to soften. The International Energy Agency had forecast a Q4 glut of up to 3.1 million bpd.
On the geopolitical front, ignoring peace calls, Russia continues its war against Ukraine. Hardening his position against Russia, US President Donald Trump yesterday labeled Russia an 'aggressor,' referring to the killing of 8,000 soldiers on both sides this past week alone.
Over the weekend, Ukrainian drones set the Kirishi oil refinery in Russia's north-west (one of Russia's largest) on fire. The refinery refines about 17.7 million metric tons per year (355,000 barrels per day) of Russian crude, or 6.4% of the country's total.
While calls on US for to impose heavier sanctions on Russia growing stronger, yesterday Trump agreed to go ahead provided Europe matches the US by ending buying Russian oil.
If the US and Europe join hands against Russia, it may heavily alter the Russian oil supply into the market.
Trump had imposed 25% 'penalty tariffs' against India, a major purchaser of Russian oil, alleging that money from India-Russia oil trade helps Russia in its military operations. However, India's oil imports from Russia rose to around $3.4 billion in August.
Last week, Israeli Defense Forces conducted an airstrike in Doha, Qatar, targeting Hamas leaders. Qatar has vowed to respond strongly to Israeli attack.
Expressing solidarity with Qatar, an emergency summit of the Arab League and Organisation of Islamic Cooperation (OIC) took place in Doha.
However, Israel reaffirmed that it would hunt down Hamas leaders 'everywhere.' US Secretary of State Marco Rubio promised that the US would extend 'unwavering support' to Israel.
The situation in the Middle East is currently tense but calm.
Heightening geopolitical tensions in Europe and the brewing disquiet in the Middle East have raised supply side concerns for crude oil.
In the US, the much-anticipated monetary policy meeting of the US Federal Reserve is set to begin tomorrow. Markets reckon a 25-basis-point rate cut as a given. Of note, Trump has explicitly asked the US Fed Chair Jerome Powell to make 'bigger' cuts.
Crude oil is a dollar-denominated commodity. Any decision on interest rate by the US Fed would impact the US dollar and eventually crude oil prices.
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