Oil prices hovered at two-week highs on Monday as investors expect a likely U.S. Federal Reserve interest rate cut this week to lift economic growth and energy demand, while monitoring geopolitical risk that threatens Russian and Venezuelan supply, APA reports, citing Reuters.

Brent crude futures rose 9 cents, or 0.14%, to $63.84 a barrel by 0321 GMT, while U.S. West Texas Intermediate crude was at $60.16, up 8 cents, or 0.13%.

Both contracts closed Friday’s trading session at their highest levels since November 18.

Markets are pricing in an 84% chance of a quarter-point cut at the Fed meeting on Tuesday and Wednesday, LSEG data showed. However, board member comments indicate the meeting is likely to be one of the most divisive in years, intensifying investor focus on the bank’s policy direction and internal dynamics.

In Europe, progress in Ukraine peace talks remains slow, with disputes over security guarantees for Kyiv and the status of Russian-occupied territory still unresolved. U.S. and Russian officials also have differing views on the peace proposal tabled by the administration of U.S. President Donald Trump.

"The various potential outcomes from Trump’s latest push to end the war could release a swing in oil supply of more than 2 million barrels per day," ANZ analysts said in a client note.

Commonwealth Bank of Australia analyst Vivek Dhar said a ceasefire is the main downside risk to the outlook for oil prices while sustained damage to Russia’s oil infrastructure is a significant upside risk.

"We think oversupply concerns will eventually be realised, especially as Russian oil and refined product flows eventually circumvent existing sanctions, prompting futures to gradually track towards $60/bbl through 2026," Dhar said in a client note.

In the meantime, Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban, people familiar with the matter told Reuters, which would likely further curb supply from the world’s second-largest oil producer.

The U.S. has also ramped up pressure on Venezuela - part of the Organization of the Petroleum Exporting Countries - including strikes against boats it said were attempting to smuggle illegal drugs from the OPEC member, as well as talk of military action to overthrow President Nicolas Maduro.

Elsewhere, Chinese independent refiners have stepped up purchases of sanctioned Iranian oil from onshore storage tanks using newly issued import quotas, trade sources and analysts said, easing a supply glut.