Oil markets took a sharp turn this week as crude prices hovered near two-week highs, buoyed by expectations of a US interest rate cut and rising geopolitical risks. According to Reuters, oil prices were supported by "the prospect of the U.S. Federal Reserve cutting interest rates and concerns over supply disruptions in the Middle East."
Brent crude futures rose to $68.50 per barrel, while West Texas Intermediate (WTI) crude hit $63.20 - the highest levels since late November. "The market is pricing in a rate cut by the Fed this week, which would be supportive for oil demand," said Phil Flynn, an analyst at Price Futures Group, as quoted by TradingView.
Geopolitical Tensions Stoke Oil Price Volatility
Ongoing tensions in the Middle East also contributed to the oil price rally, with Reuters reporting that the G7's ban on Russian oil tankers "shows teeth, but bite is in doubt." The article noted that while the ban aims to limit Russia's ability to export crude, "the impact remains uncertain as Moscow has found ways to circumvent previous sanctions."
Analysts warn that further escalation of geopolitical risks could lead to supply disruptions and drive oil prices even higher. "The market is very sensitive to any potential supply shocks, especially with the OPEC+ cuts and the sanctions on Russian oil," said Flynn.
Natural Gas Prices Surge, Boosting Coal's Comeback
While oil markets were buoyed by macroeconomic and geopolitical factors, the natural gas sector saw its own dramatic shift this week. U.S. benchmark natural gas prices at Henry Hub jumped from $4.23 per million British thermal units (MMBtu) at the start of November to above $5 per MMBtu by early December - the highest level in three years.
According to OilPrice.com, the surge in natural gas prices "has set the stage for a coal comeback" as utilities turn to the cheaper fuel for power generation. "As U.S. natural gas prices jumped to a three-year high, coal has become a cheaper power-generating fuel for utilities, which are set to run coal-fired generators harder this winter," the article stated.
Europe's Soft Gas Prices Squeeze U.S. LNG Exporters
The natural gas price spike is also impacting the liquefied natural gas (LNG) export market, where U.S. producers have been enjoying a record-breaking year. However, OilPrice.com reported that "Europe's soft gas prices are putting the squeeze on U.S. LNG traders," as higher prices eat into exporters' profits.
"When European energy supermajors went after Venture Global, they accused the company of making billions on the spot market while violating its contracts with the supermajors," the article noted. "Venture Global did indeed make a killing, but the party may be over as European gas prices soften."
Looking Ahead: Volatility and Uncertainty Persist
As we head into the new year, the oil and gas markets appear poised for continued volatility and uncertainty. Geopolitical risks, macroeconomic factors, and shifting energy dynamics will all play a role in shaping the trajectory of prices and investment decisions.
Investors and industry participants will be closely watching the outcome of the upcoming OPEC+ meeting, the Federal Reserve's interest rate decision, and any developments in the Russia-Ukraine conflict - all of which could have significant implications for global energy markets in the months ahead.
Reporting based on coverage from Reuters, TradingView, and OilPrice.com, December 7-8, 2025.