Oil prices increased on Wednesday following reports of Ukraine striking Russia with long-range weapons, while concerns over a potential US Federal Reserve (Fed) rate pause and strong US dollar curbed gains.
The international oil benchmark of Brent crude rose 0.12% to $73.23 per barrel at 11.10 a.m. local time (0810 GMT), up from the previous session’s close of $73.14.
The US benchmark West Texas Intermediate also increased by 0.14% to $69.42 per barrel, compared to $69.32 at the prior session’s close.
Tensions rose between Russia and Ukraine after international media reported that the Joe Biden administration granted Kiev permission to use long-range American weapons on Russian territory for a limited time.
The Russian Ministry of Defense announced Tuesday that Ukraine attacked the Braynsk region of Russian territory at night with 6 American-made long-range tactical ATACMS missiles.
The ministry statement noted that the missiles were blocked by S-400 and ‘Pantsir’ air defense missile systems.
Also, Russian President Vladimir Putin approved the doctrine that allows his country to respond with nuclear weapons if it is attacked by ballistic missiles.
The Russian Ministry of Defense also announced that the army captured the Novoselidovka settlement in the Donetsk region.
The ministry reported that attacks were carried out against Ukraine’s military airport infrastructure and energy elements in 146 regions in the last 24 hours.
Meanwhile, uncertainty over the timeline for ending the Fed’s inflation fight pressured asset prices, fueling speculation that an interest rate cut may be off the table next month.
According to pricing in the money markets, there is a 59% probability that the Fed will reduce interest rates next month and a 41% probability that it will keep the policy rate constant.
Also, the rise of the US dollar against other currencies is expected to lower demand by making oil more expensive for those who use foreign currencies. The US dollar index, which measures the US dollar’s value against other currencies, increased 0.11% to 106.262.
A potential trade war between the US and China, the world’s largest oil consumers, coupled with persistent concerns over China’s economic activity, continue to impact commodity prices.
Ongoing concerns about economic activity in China underpin experts’ worry over a slowdown in crude demand in the world’s biggest oil importer.
Following Donald Trump’s re-election as US President, worries over a possible trade war arose as president-elect Trump is expected to apply tax cuts on companies and high tariffs on imported goods.
