Oil Rally on Fed Rate Cut Bets — But Peace Talks Threaten the Upside

Crude surged Monday as Wall Street’s optimism over potential Fed rate cuts sparked fresh energy demand narratives. WTI January futures climbed 1.26% to $58.79/barrel, riding the coattails of hawkish pivot signals from Fed officials.

The bullish case: John Williams and Christopher Waller both signaled December rate cut support citing labor market weakness. Lower rates = cheaper borrowing = more economic activity = higher oil consumption. Classic playbook.

The wrench in the gears: Trump’s new 28-point Russia-Ukraine peace proposal is gaining traction. Negotiations in Geneva are heating up, with both sides reportedly moving toward a “revised framework.” If a deal closes, Russian and Ukrainian oil flooding back into markets could crater prices hard. Oil already felt downward pressure from these headlines.

The supply wildcard: U.S. sanctions on Rosneft and Lukoil are working—China, India, and Turkey are quietly pivoting away from Russian barrels. But here’s the kicker: peace = sanctions lifted = Russian supply unleashed. That’s potentially 2-3M barrels/day hitting the market.

Macro headwinds: Dollar strength persisting despite Fed rate cut chatter. OPEC+ eyeing production hikes. Demand growth concerns linger. Oil’s caught between Fed optimism (bullish) and supply overhang risks (bearish).

Bottom line: Short-term rally legs on rate cut expectations, but geopolitical peace talks are the real price driver now. Watch Geneva closely.