Expectations of Fed rate cuts slightly weigh on oil prices

Oil prices edged lower as investors looked forward to the upcoming meeting of the U.S. Federal Reserve for clues on potential further interest rate cuts. This downward movement was countered by concerns over possible supply disruptions in light of upcoming U.S. sanctions against key suppliers Russia and Iran. Brent crude futures fell by 21 cents, a 0.3% decline, to $74.28 a barrel, after reaching the highest level since November 22. U.S. West Texas Intermediate also dropped 30 cents or 0.4%, ending at $70.99 a barrel, following a peak since November 7 in the previous session. Oil prices were supported by the recently imposed European Union sanctions on Russian oil and the expectation of stricter restrictions on Iranian supply, according to IG market analyst Tony Sycamore. This was complemented by remarks from U.S. Treasury Secretary Janet Yellen, who told Reuters that the U.S. is considering further sanctions against so-called "dark fleet" tankers and potential measures against Chinese banks to curb Russian oil revenues and hinder access to international supplies. New U.S. sanctions against players in the Iranian oil market are already leading to an increase in the price of crude oil exported to China, reaching the highest level in years. The incoming Trump administration appears to plan further pressure on Iran. Another bolster to oil prices is the recent interest rate adjustments by central banks in Canada, Europe, and Switzerland, as well as hopes that the Fed will also lower its key interest rates. The central bank meeting from December 17 to 18 might bring a quarter-point cut and possibly provide insights into further interest rate reduction plans through 2025 and possibly 2026. Lower interest rates could spur economic growth and thereby further boost oil demand.