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Oil prices gained slightly on Monday as escalating Ukrainian attacks on Russian energy assets raised fears of potential supply disruptions. Market sentiment was also buoyed by expectations of a possible US interest rate cut, which could support global economic growth and boost fuel demand.

Near 9:30 AM, Brent crude futures were up by 3 cents, or 0.04 per cent, trading at $67.76 per barrel, while West Texas Intermediate (WTI) crude added 7 cents, or 0.11 per cent, to $63.73 per barrel, reported Reuters.

Drone Strikes Spark Fires at Key Russian Facilities

Tensions escalated over the weekend after Ukraine launched drone strikes on Russian infrastructure, causing significant damage. Russian authorities confirmed that a reactor at one of the country’s largest nuclear power plants saw a sharp reduction in output following the attack. In addition, a massive fire broke out at the Ust-Luga fuel export terminal, further fuelling concerns about supply stability.

The Novoshakhtinsk refinery, another major energy site targeted by Ukrainian drones, has been battling a blaze for four consecutive days, the regional acting governor said on Sunday. This refinery, which primarily supplies fuel for export, processes about 5 million metric tonnes of oil annually — equivalent to roughly 100,000 barrels per day.

“Given the success that Ukraine is having with its targeting of Russian oil infrastructure … the risks for crude oil are shifting to the topside,” noted Tony Sycamore, market analyst at IG.

Diplomatic Signals Amid Growing Geopolitical Tensions

On the diplomatic front, US Vice President JD Vance indicated on Sunday that Russia has shown “significant concessions” in negotiations related to its ongoing war in Ukraine. Speaking on NBC’s Meet the Press with Kristen Welker, Vance stated, “They've recognised that they're not going to be able to install a puppet regime in Kyiv… and they've acknowledged that there is going to be some security guarantee for the territorial integrity of Ukraine.”

However, the optimism was tempered by renewed warnings from US President Donald Trump, who reiterated on Friday that Washington could impose sanctions on Moscow if no progress is made toward a peace agreement within the next two weeks.

Fed Signals Boost Commodity Market Sentiment

Beyond geopolitics, oil markets drew support from improved investor confidence after Federal Reserve Chair Jerome Powell hinted at a potential interest rate cut in the upcoming policy meeting. Analysts at ANZ noted in a report, “A risk-on tone across markets boosted investor appetite across the commodities complex, aided by renewed supply side issues across energy and metals.”

With supply risks mounting and central banks signalling a softer monetary stance, oil traders are watching developments in Eastern Europe and the US closely, as these factors could shape the direction of crude prices in the weeks ahead.