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Geopolitical Risks Loom Large Over Oil Markets

While optimistic inflation data slightly buoyed oil earlier this week, with the Fed indicating one rate cut before the end of this year, and more to follow in 2025 and 2026, a cocktail of global events is just as likely to sway crude prices in the coming weeks. 

In a flanking movement, Russia is trying to secure its position off the coast of Libya on the Mediterranean (within easy reach of Italy, and really anywhere in Western Europe), as Russian warships, including one a nuclear-powered sub, arrive in Havana Bay, Cuba, just off the Gulf of Mexico, for military exercises. Tensions are noticeably rising since NATO took on new members and new aid began flowing to Ukraine, with (limited) U.S. permission to fire on Russian territory. Washington is also granting Kyiv access to F-16s, which is likely more of a long-term move that will not be an immediate game-changer on the frontline. Both Washington and Brussels also slapped hundreds of new sanctions on Russia, including on its oil-shipping giant, Sovcomflot. 

At the G7 summit in Italy this week, the US and Ukraine signed a security deal, which is also essentially a preliminary phase to joining NATO, as suggested in the text of the document. While the deal fell short of the "red line" of deploying U.S. troops, combined with a $50 billion G7 loan to Kyiv, recent events require a response from Moscow, as well. That response we find, for now, in Cuba, where military exercises included the use of dummy nuclear warheads. 

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