Oil Hits Two-Week High on Fed Rate-Cut Expectations and Heightened Supply Risks

Oil prices climbed nearly 1% to a two-week high, with Brent settling at $63.75 and WTI at $60.08, driven by growing expectations that the U.S. Federal Reserve will cut rates next week. Traders now assign an 87% probability to a 25-basis-point cut, which would support economic growth and boost energy demand. Additional upward pressure came from geopolitical risks, including uncertainty around future supplies from Russia and Venezuela, as Ukrainian drone attacks and stalled peace talks raise concerns over Russian output. Meanwhile, G7 and EU discussions about replacing the Russian price cap with a full maritime services ban could further limit Russia’s ability to export oil on Western vessels. Markets are also watching Venezuela after Trump signaled possible U.S. military action, which could jeopardize 1.1 million barrels per day of Venezuelan crude production.

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EU and G7 Consider Full Maritime Services Ban to Curb Russian Oil Revenues

The EU and G7 are discussing replacing the current Russian oil price cap with a full maritime services ban, which would block Western tankers and insurers from serving Russian oil exports. About 38% of Russian oil exports still rely on Western-linked tankers—mostly from Greece, Cyprus, and Malta—while the remaining 62% moves via the 1,423-tanker dark/shadow fleet, including 921 vessels already under Western sanctions. The proposal could be included in the EU’s next sanctions package slated for early 2026, but would require alignment with a broader G7 agreement. Russia may need to significantly expand its shadow fleet if the ban is enacted, as Western-controlled shipping currently moves more than one-third of its barrels, primarily to India and China. The debate is influenced by shifting U.S. policy under President Trump, who has been skeptical of tightening the price cap and declined to support lowering it from $60 to $47.6 per barrel in 2025.

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China’s Independent Refiners Tap Stored Iranian Oil as New Quotas Boost Run Rates

Chinese independent refiners (“teapots”) have begun buying discounted Iranian crude from onshore storage after receiving an early 2026 import quota of 8 million tons (58.4 million barrels), helping them raise run rates and ease recent supply gluts. Operating rates in Shandong jumped to 61.3% in early December, up from around 50% in prior months, prompting analysts to revise China’s December refining runs higher by 150,000 bpd. Iranian light crude from bonded tanks is selling at over $8 per barrel discounts to ICE Brent—much wider than September’s $6—driving higher margins for teapot refiners. However, analysts expect the new quota to have limited impact on China’s seaborne crude imports, as refiners rely heavily on nearby stored oil for quick supply. Demand for Russian barrels remains weak, with ESPO Blend crude falling to a record discount of more than $6 per barrel amid sanctions concerns and growing volumes of unsold December cargoes.

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India’s IOC and BPCL Boost January Purchases of Discounted, Sanctions-Compliant Russian Oil

Indian Oil Corp (IOC) and Bharat Petroleum Corp (BPCL) have placed January-loading orders for Russian oil from non-sanctioned suppliers, taking advantage of widening discounts of $6–$7 per barrel for Urals crude versus dated Brent. BPCL bought four cargoes—two Urals and two CPC—while IOC continued its steady intake of compliant Russian grades after U.S. sanctions hit Rosneft and Lukoil in October. BPCL opted out of December-loading Russian cargoes and does not plan further January purchases, having secured supply from other sources. Other Indian refiners, including MRPL and HPCL, have halted Russian crude buying due to sanctions, while Nayara Energy continues to run exclusively Russian oil. Reliance Industries stated it will refine any Rosneft-linked cargo arriving after November 20 under its existing agreement.