As tensions between Russia and Ukraine increase, oil prices creep upward

Oil prices saw a modest increase on Monday following intensified fighting between Russia and Ukraine over the weekend. However, concerns about fuel demand in China—the world’s second-largest oil consumer—and projections of a global oil surplus continued to weigh on the markets.

Brent crude futures rose by 29 cents, or 0.4%, to $71.33 per barrel at 0502 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 18 cents, or 0.3%, reaching $67.20 per barrel.

Russia launched its most significant airstrike on Ukraine in nearly three months on Sunday, severely damaging Ukraine’s power infrastructure.

In a shift from its previous stance on the Ukraine-Russia conflict, the Biden administration has approved the use of U.S.-made weapons by Ukraine to target deeper into Russian territory. This decision, confirmed by two U.S. officials and a source familiar with the matter, marks a major policy reversal. The Kremlin has not yet responded, but it has warned that any loosening of restrictions on Ukraine’s use of U.S. weapons would be seen as a major escalation.

Tony Sycamore, an analyst at IG Markets, commented, "Biden's approval for Ukraine to strike Russian forces near Kursk with long-range missiles could increase geopolitical tensions, especially with North Korean troops now involved."

Energy analyst Saul Kavonic from MST Marquee noted, “While there has been little impact on Russian oil exports so far, if Ukraine targets more oil infrastructure, it could push oil prices higher.”

In Russia, at least three refineries have reduced processing or halted operations entirely due to losses stemming from export restrictions, rising crude prices, and high borrowing costs, according to five industry sources.

Despite last week’s decline of more than 3% in both Brent and WTI, driven by weak data from China and the International Energy Agency’s forecast that global oil supply will outpace demand by over 1 million barrels per day in 2025, market concerns remain. These issues persist even if OPEC+ continues its production cuts.

China’s refinery throughput fell 4.6% in October compared to the previous year, with slower factory output growth also recorded, as indicated by government data released Friday.

Additionally, market participants are worried about the timing and magnitude of U.S. Federal Reserve interest rate cuts, contributing to uncertainty in global financial markets.

In the U.S., the number of operational oil rigs fell by one to 478 last week, marking the lowest level since the week ending July 19, according to Baker Hughes (NASDAQ: BKR) data.

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.