WASHINGTON (dpa-AFX) - Crude oil rebounded to post sharp gains on Monday as the likelihood of the U.S. getting involved in the ongoing Russia-Ukraine war triggered fresh concerns of military escalation as well as new sanction threats on Russian oil exports.
WTI Crude Oil for November delivery was last seen trading up by $0.67 (or 1.14%) at $59.57 per barrel.
In Europe, after Russia stepped up its military aggression over the past few weeks, Ukraine's President Volodymyr Zelenskyy asked the U.S. to supply the country with Tomahawk missiles to confront Russia.
Of note, the Tomahawk is a long-range cruise missile having a range of 2,500 kilometers, launched from sea.
U.S. President Donald Trump responded, stating that the U.S. will supply the missiles it would end the ongoing conflict. Not taking this lightly, Russia became furious, with Russian President Vladimir Putin's aide issuing threats and terming Trump a 'business peacemaker.'
Traders are concerned that further involvement by the U.S. in the war could provoke Russia and lead to further military escalation as well as compel the U.S. to enforce harsher sanctions on Russian oil exports, disrupting oil trade.
Last week, learning of China's export curbs on rare earth minerals, Trump announced new tariffs of 100%, starting November 1, on top of previous import levies. In addition, he mentioned plans to control exports of 'critical software' (not elaborating on what he meant).
However, undeterred, China urged the U.S. to adopt diplomatic tactics to address trade-related issues rather than coercion.
In a later message, Trump stated 'all was fine with China'.
This gave rise to expectations of easing of tensions between the world's two largest economies as well as huge oil consumers, which lifted market sentiment.
In a significant development in the Middle East, Israel and Hamas swapped Palestinian prisoners with all the remaining Israeli hostages as part of the first phase of Gaza Peace Plan, proposed by Trump last week.
This has eased the geopolitical risk premium which kept oil prices volatile earlier due to fears of attacks on global crude supply routes. With this, the possibility of Houthi attacks in the Red Sea also gets eliminated.
This progress along with increase in the U.S. dollar (99.21) capped oil prices from soaring much higher.
Different agencies of the U.S. have sanctioned nearly hundreds of individuals, entities, companies, and vessels involved in the movement of Iranian energy products that generate petrodollars for Tehran.
In its monthly market report, OPEC has forecasted that global oil demand will grow by 1.3 million barrels per day in 2025 and by 1.4 million bpd in 2026. OPEC expects global oil demand to reach an average of 105.1 million bpd in 2025 and 106.5 million bpd next year, with emerging markets being key drivers.
The projected demand for OPEC+ crude was also same as reported last month, at 42.5 million barrels a day this year, with the demand for next year projected to rise to 43.1 million barrels a day.
OPEC's optimism is in stark contrast with recent warnings from the International Energy Agency, which forecasted a significant rise in global oil stocks in the second half of 2025 due to supply overriding demand.
Meanwhile, in the U.S., the government shutdown continued for the thirteenth day today.
The Bureau of Labor Statistics is set to publish the September 2025 Consumer Price Index on October 24. Many other key economic indicators are now unavailable for markets as well as the U.S. Federal Reserve, which uses these numbers to decide on interest rates in their monetary policy meetings.
Despite this, the CME Group FedWatch Tool still indicates that investors see a 96.7% chance of a 25-basis-point rate cut at the upcoming October 28-29 Federal Reserve meeting.
According to analysts, caught between the Sino-U.S. trade standoff, easing of tension in the Middle East, and the intensifying Russia-Ukraine war, oil prices are expected to be impacted by the trajectory that the U.S. dollar tracks after the Fed's meeting as crude oil is a dollar-denominated commodity.
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