Oil prices rose on Monday, spurred by hopes that the US Federal Reserve might lower interest rates, alongside growing tensions in the Middle East. However, concerns about a potential US recession limited further gains in the market. The international benchmark Brent crude saw a 0.6% increase, reaching $71.82 per barrel by mid-morning, while US benchmark West Texas Intermediate (WTI) climbed 0.6% to $68.07 per barrel.
The Federal Reserve’s anticipated actions have become a major influence on oil prices. Federal Reserve Governor Christopher Waller indicated on Friday that it might be time to start reducing interest rates, even suggesting the possibility of larger cuts if the economic data supports such a move. Waller noted that the labour market and the economy were performing well, with inflation hovering near 2%, which he believes supports rate cuts at consecutive meetings if necessary. Market analysts expect the Fed to lower rates by 25 basis points this month, with further reductions totalling 100 basis points by the year’s end. Such cuts could weaken the US dollar, making oil more affordable and boosting demand.
At the same time, tensions in the Middle East provided upward pressure on prices. The Yemeni Houthi group reported that they had shot down an American MQ-9 drone over Marib province, claiming it was involved in hostile activities. This incident added to fears that conflict in the region might escalate and disrupt global oil supplies.
Union Jack Oil plc (LON:UJO) is an oil and gas company with a focus on onshore production, development, exploration and investment opportunities within the United Kingdom and the United States of America hydrocarbon sector.
