Oil Edges Higher as US Shutdown Deal Hopes Lift Demand Bets

Shutdown progress gives crude a cautious lift

Oil edges higher as US shutdown deal hopes lift demand bets, with Brent and West Texas Intermediate nudging up in Monday trading after signs that Washington is moving toward a temporary funding agreement. At around 13:40 GMT, Brent January futures traded near 63.9 dollars a barrel and WTI around 60 dollars, gains of roughly 0.4 percent. The move followed a US Senate step toward a deal that would reopen the federal government until late January, a shift that traders read as positive for aviation, federal fuel consumption and broader confidence in the world’s largest oil consumer.

How shutdown risk feeds into demand expectations

The prolonged shutdown has sidelined federal workers, snarled air travel and delayed food and social support, weighing on mobility and sentiment. Airlines canceled thousands of flights over the weekend; if a deal is finalized, carriers expect a clearer runway into the winter holidays, traditionally a firm period for jet fuel demand. Traders are not betting on a sudden surge, but the prospect of normalized government operations reduces tail risk scenarios that had included deeper disruptions to travel and logistics. As a result, some participants are willing to lift demand assumptions modestly and edge crude prices higher.

Gains capped by oversupply worries

Even with US shutdown hopes in play, the rally is restrained. Both benchmarks are recovering from about 2 percent losses the previous week, when fears of an emerging surplus dominated. OPEC+ has already increased output by close to 3 million barrels per day in 2025, while non OPEC production from the United States and other suppliers remains robust. Crude stored at sea in Asian waters has risen, reinforcing the view that physical availability is comfortable. Against that backdrop, Monday’s move looks like a measured repricing of risk rather than the start of a sustained bull leg.

Inventory signals remain a drag

Market attention is fixed on recent and upcoming stock data. Rising US crude inventories, supported by steady production and a patchy refining run rate, have offset some optimism around better demand. Additional builds would harden the narrative that supply is running ahead of consumption, limiting room for prices to move significantly higher without clear evidence of stronger draws. If the shutdown agreement lifts transport activity and smooths government operations, the effect on inventories will still take time to show; until then, storage trends continue to anchor expectations.

OPEC+ and IEA outlooks in focus

The market is also bracing for monthly assessments from OPEC and the International Energy Agency, which offer competing readings on balances. OPEC+ argues that gradual increases are compatible with stable prices, while many analysts warn that 2026 could see a loose market if growth stays subdued. Any downgrade to demand projections or acknowledgement of rising non OPEC supply would reinforce caution. Conversely, a tighter outlook could validate current levels near 64 and 60 dollars and lend support to those who believe recent weakness overshot fundamentals. For now, traders are reluctant to place large directional bets ahead of fresh guidance.

Flight disruption and jet fuel nuance

The shutdown’s impact on travel has been a key swing factor in the very short term. The worst disruption day saw more than 2,800 flights canceled and over 10,000 delayed, raising questions about jet fuel offtake. Optimism over an end to the standoff has tempered those concerns, although airlines and refiners remain wary of sudden schedule changes. If a funding deal is confirmed quickly, winter demand for jet fuel could normalize close to previous planning assumptions, a modest positive that aligns with the lift in prices but does not on its own justify a major rally.

Financial flows and broader risk sentiment

Improved risk appetite across equities and credit, helped by the perceived breakthrough in Washington, has filtered into commodities. Some macro funds that had cut exposure during the shutdown uncertainty are selectively adding length in crude as part of a wider pro risk adjustment. However, positioning remains conservative. The recent sequence of weekly declines, the memory of rapid reversals and unresolved questions around global growth keep investors wary of chasing intraday moves. Oil edges higher on US shutdown hopes, but the underlying tone is one of cautious, data dependent demand bets rather than aggressive speculation.

Lukoil tension and regional supply risks

News that Lukoil declared force majeure at Iraq’s West Qurna-2 field has added a discrete layer of supply risk to an otherwise comfortable balance. So far, participants view the Iraqi development as manageable, but it reinforces the sense that geopolitical frictions can tighten specific streams even when aggregate supply appears ample. This tension between localized disruptions and broader surplus concerns is one reason price action remains contained within a relatively narrow band, with traders reluctant to price either extreme scenario as their base case.

What traders are watching next

Short term, the tape will be driven by three sets of signals: confirmation that a shutdown deal passes both houses and is signed; weekly US inventory data that either validate or challenge surplus fears; and the tone of OPEC and IEA reports on 2026 balances. Airlines’ updated schedules, refinery margin trends and changes in floating storage volumes will provide additional color. Any sign that demand improves into year end without a corresponding jump in supply could encourage more constructive positioning; a failure to secure political agreement or another run of stock builds would likely cap or reverse the latest gains.

Bottom line

Oil Edges Higher as US Shutdown Deal Hopes Lift Demand Bets, but the move is modest and conditional. Hopes for a government funding agreement have reduced downside risk and supported prices at the margin, yet persistent oversupply concerns, rising inventories and policy uncertainty mean the crude market remains finely balanced, with sentiment driven as much by politics and data as by immediate barrels on the water.