Oil prices fell by 2% on Tuesday, marking a third consecutive session of losses, as investors assessed the impact of US sanctions on Russia’s two largest oil producers alongside potential OPEC+ plans to raise output.

Brent crude futures dropped by $1.29, or 2%, to $64.33 a barrel at 08:56 GMT, while US West Texas Intermediate (WTI) futures declined by $1.20, or 2%, to $60.11 a barrel.

ANZ Group said in a morning note that “traders are assessing progress in US-China trade talks, as well as the broader outlook for global supply.”

The decline followed last week’s sharp rally — the biggest weekly gain since June — after US President Donald Trump imposed sanctions on Russia for the first time in his second term, targeting oil giants Lukoil and Rosneft.

Investors continue to weigh the effectiveness of those sanctions.

Giovanni Staunovo, commodities analyst at UBS, said: “The oil market is still debating whether the latest sanctions will materially impact Russian crude exports, while traders have largely priced out last week’s supply risk premium.”

International Energy Agency (IEA) Executive Director Fatih Birol said Tuesday that the impact of sanctions on oil-exporting countries will likely remain limited due to spare capacity in the global market.

Following the US sanctions, Lukoil — Russia’s second-largest oil producer — announced on Monday that it would sell its international assets, marking the most significant step yet by a Russian company in response to Western restrictions imposed since the invasion of Ukraine in February 2022.

At the same time, two sources told Reuters that Indian refiners have not submitted any new requests for Russian crude purchases since the sanctions were announced, as they await government guidance and clarification from suppliers.

OPEC+ Considering a December Output Increase

Four sources told Reuters that the OPEC+ alliance — which includes the Organization of the Petroleum Exporting Countries and its partners led by Russia — is leaning toward another small production hike in December.

The group has been gradually unwinding years of output cuts aimed at supporting prices, after beginning to restore production in April.

Trade Deal Expectations Between Washington and Beijing

Meanwhile, investors are monitoring prospects for a potential trade agreement between the United States and China, the world’s two largest oil consumers, ahead of the upcoming meeting between President Trump and his Chinese counterpart Xi Jinping on Thursday in South Korea.

Chinese Foreign Minister Wang Yi said in a phone call with US Secretary of State Marco Rubio on Monday that Beijing hopes Washington will “meet it halfway” in preparing for “high-level engagements” between the two nations.

The US dollar fell on Tuesday as traders prepared for a series of central bank meetings expected to deliver an interest rate cut by the Federal Reserve, while investors also focused on President Donald Trump’s Asia tour amid hopes for a trade deal with China.

The Japanese yen rose more than 0.6% to 151.855 per dollar ahead of this week’s Bank of Japan meeting, where policymakers are expected to keep rates unchanged. Markets, however, will be watching closely for signals on the timing of the next rate hike.

Yen gains were supported by comments from US Treasury Secretary Scott Bessent, who called for “disciplined monetary policy” after meeting his Japanese counterpart, Satsuki Katayama — the latest in a series of remarks criticizing the Bank of Japan’s slow pace of tightening.

In Tokyo, Trump met Japan’s new Prime Minister Sanae Takaichi, praising her pledge to accelerate military capacity-building and signing new agreements on trade and rare-earth minerals.

Hopes for a Trade Deal with China

Although early signs of easing tensions between the world’s two largest economies spurred a wave of risk-taking on Monday, investors remain cautious that any potential deal may fall short of expectations.

The world’s attention now turns to Thursday’s meeting between Trump and Chinese President Xi Jinping in South Korea.

Speaking aboard Air Force One before landing in Tokyo, Trump said, “I have great respect for President Xi, and I believe we’ll come out with an agreement.”

Chinese officials, meanwhile, have maintained a reserved tone and offered no clear indication of potential outcomes from the talks.

Vasu Menon, Executive Director of Investment Strategy at OCBC Bank, said a “perfect solution or even a comprehensive settlement” is unlikely, suggesting unresolved issues could be postponed.

“When two global economic powers led by strong leaders try to reach an agreement, the process is never smooth,” Menon added. Still, he noted that any tangible progress could be enough to reassure markets and sustain the stock rally.

Rate Cut Expectations Pressure the Dollar

The dollar’s decline was also driven by expectations of a 25-basis-point rate cut by the Federal Reserve. The euro rose to a one-week high at 1.1668 dollars, while the British pound gained 0.25% to 1.3368 dollars.

The US Dollar Index, which measures the greenback’s performance against six major peers, slipped 0.19% to 98.58 after a 0.15% drop in the previous session.

Markets Await the Fed Meeting

While a rate cut is almost certain, investors will focus on whether the Fed signals an end to its quantitative tightening program. Markets will also watch Chair Jerome Powell’s comments for clues about future cuts, especially amid the ongoing US government shutdown that continues to delay economic data releases.

Traders also expect another rate reduction in December.

David Merkel, Chief Economist at Goldman Sachs, said: “We don’t expect explicit guidance on the December meeting, but Powell is likely to reference the September projections that pointed to a third rate cut by then.”

The Fed lowered rates by 25 basis points last month.

Other Central Banks Stay Cautious

In Europe, the European Central Bank is expected to leave interest rates unchanged again on Thursday, while traders remain divided on whether monetary easing could resume next year.

In the Asia-Pacific region, the Australian dollar — often viewed as a proxy for risk appetite — rose 0.11% to 0.6563 US dollars, a two-week high, while the New Zealand dollar edged slightly higher to 0.5782.

Silver prices slid to a five-week low in European trading on Tuesday, deepening losses for the third consecutive session as heavy selling pressure hit safe-haven assets amid rising optimism over trade talks and improving risk appetite across global markets.

Later today, the US Federal Reserve begins its key two-day monetary policy meeting, with decisions due Wednesday. Market expectations remain steady for a 25-basis-point rate cut — the second consecutive reduction in US interest rates.

Price Overview

• Silver prices fell 2.9% to $45.56 an ounce, the lowest since September 26, down from an opening level of $46.93, after touching a session high of $47.23.

• On Monday, silver lost about 3.5%, marking its second straight daily decline.

Trade Optimism

US President Donald Trump said he expects to reach a “fair trade deal” with Chinese President Xi Jinping when the two meet Thursday in South Korea, downplaying the risk of confrontation over the Taiwan issue.

On Sunday, senior economic officials from the US and China held important discussions on a new trade framework that is expected to be presented to Trump and Xi for final approval in the coming days.

Trump also announced a series of trade and raw-material agreements in Malaysia with four Southeast Asian countries during the first stop of his five-day Asia tour.

These positive developments quickly lifted global equity markets, pushing major Wall Street indexes to record highs, led by strong gains in technology and basic materials stocks.

Federal Reserve

The Federal Reserve’s policy meeting begins later today, with a decision expected Wednesday. Markets broadly anticipate a 25-basis-point rate cut — the second consecutive reduction in the benchmark US interest rate.

The post-meeting statement and remarks by Fed Chair Jerome Powell are expected to provide clear guidance on whether further rate cuts could follow later this year.

US Interest Rates

According to CME’s FedWatch Tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at this week’s meeting, with only a 3% chance of no change.

Gold prices fell in European trading on Tuesday, deepening losses for the third consecutive session and hitting a three-week low, as open selling positions accelerated and investors moved away from safe-haven assets amid easing trade tensions between the United States and China.

Later today, the Federal Reserve begins its highly anticipated monetary policy meeting, with decisions due Wednesday. Markets broadly expect a 25-basis-point rate cut — the second consecutive reduction in US interest rates.

Price Overview

• Gold prices fell more than 2.0% to $3,901.35 per ounce, the lowest since October 6, down from the opening level of $3,981.50, after hitting an intraday high of $4,019.80.

• On Monday, gold lost 3.2%, its second daily decline in a row, as it fell below the key $4,000-per-ounce level amid optimism surrounding global trade talks.

Trade Developments

On Sunday, senior economic officials from the United States and China held significant discussions to outline a new trade framework expected to be presented to US President Donald Trump and Chinese President Xi Jinping for final approval in the coming days.

Trump and Xi are scheduled to meet Thursday in South Korea — their first encounter of Trump’s second term — in what analysts expect to be a pivotal moment for US–China relations, particularly regarding global trade and geopolitical tensions in Asia.

Trump expressed confidence that a deal could be reached and announced a series of trade and raw-material agreements in Malaysia with four Southeast Asian countries during the first leg of his five-day Asia tour.

Federal Reserve

The Federal Reserve’s policy meeting begins later today, with a decision due Wednesday. Markets expect a 25-basis-point rate cut, marking the second consecutive reduction in benchmark US interest rates.

The post-meeting statement and comments from Fed Chair Jerome Powell are expected to provide clear guidance on whether additional rate cuts are likely before year-end.

US Interest Rates

According to CME’s FedWatch Tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at this week’s meeting, with only a 3% chance of no change.

Gold Outlook

• Tim Waterer, chief market analyst at KCM Trade, said: “Buyers who have been watching from the sidelines are beginning to take positions at these price levels. We’re also seeing some softness in the dollar, which gives gold a chance to rebound.”

• Waterer added: “If Trump and Xi hold a productive trade meeting this week, gold could stage a countertrend rise — though that might be offset if the Fed adopts a cautious tone alongside the expected rate cut.”

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 8.01 metric tons on Monday — the second consecutive daily decline — bringing the total to 1,038.92 metric tons, the lowest since October 16.