Oil prices rose modestly on Friday following intensified geopolitical tensions as Russia announced it had fired a ballistic missile at Ukraine. The development sparked concerns over the potential escalation of the conflict, raising fears of tighter crude supplies in an already volatile global oil market.
Brent crude futures edged up by 14 cents (0.2%), reaching $74.37 per barrel by 0007 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed 17 cents (0.2%), settling at $70.27 per barrel.
The price movements follow a stark warning from Russian President Vladimir Putin, who on Thursday characterized the Ukraine war as morphing into a broader global conflict. His comments came after Ukraine conducted strikes on Russian territory using U.S.- and British-made missiles.
“Russia has responded decisively to these provocations,” Putin said, referencing Moscow’s use of a newly developed hypersonic medium-range ballistic missile to target a Ukrainian military facility. The weapon’s deployment signals a heightened phase of the conflict, prompting fears of further retaliatory actions.
The strikes by Ukraine included the use of six U.S.-made ATACMS (Army Tactical Missile Systems) on Nov. 19 and British Storm Shadow missiles alongside U.S.-made HIMARS (High Mobility Artillery Rocket Systems) on Nov. 21. Putin warned that Moscow could escalate its response if Western nations continued supplying advanced weapons to Ukraine.
Russia, one of the world’s leading crude oil producers, plays a pivotal role in global energy markets. Despite international sanctions and output declines linked to its invasion of Ukraine, Russia remains a key supplier, producing around 9 million barrels of oil per day this month. Analysts caution that a prolonged escalation in the conflict could disrupt Russian exports, creating a ripple effect on global supply chains.
Ukraine, on the other hand, has increasingly targeted Russian energy infrastructure. Notably, long-range drones were used in June to strike four Russian refineries, highlighting the vulnerability of critical oil production facilities.
The ongoing conflict has amplified volatility in oil markets, with traders balancing geopolitical risk against demand trends and inventory levels.
While the geopolitical developments pushed prices higher, gains were tempered by swelling crude and gasoline stocks in the United States. Government data released this week revealed that U.S. crude inventories rose by 545,000 barrels in the week ending Nov. 15, bringing total stockpiles to 430.3 million barrels. Gasoline inventories also climbed by 2.1 million barrels to 208.9 million barrels.
“Next week’s data could show another significant jump in inventories, particularly with increased production and refinery activity,” noted Jim Ritterbusch, head of Ritterbusch and Associates. He added that such trends might exert downward pressure on both crude oil and refined product prices.
China, the world’s largest importer of crude oil, remains a focal point for market participants. On Thursday, Beijing unveiled policy measures aimed at bolstering trade, including steps to support energy product imports. The move comes amid concerns over global economic uncertainties and trade relations with the United States.
The Chinese government’s policy interventions are seen as a bid to stabilize its economy, which has shown signs of slowing growth. Market analysts are closely watching how these measures impact China’s demand for crude oil and other commodities.
Analysts predict continued volatility in oil markets as geopolitical tensions and economic uncertainties clash with fundamental supply and demand dynamics.
Geopolitical Risk Premium: With the Ukraine war escalating and Russia signaling the use of advanced weaponry, concerns about energy security are mounting. Any disruption to Russian oil exports would likely drive prices higher in the short term.
- U.S. Inventory Dynamics: Rising stockpiles in the U.S. could counterbalance upward price pressures, particularly if production rebounds and refineries ramp up operations.
- China’s Economic Policies: The success of Beijing’s measures to stimulate energy imports and broader trade will be crucial for sustaining global oil demand.
Jim Ritterbusch highlighted the tug-of-war between geopolitical risks and inventory trends, emphasizing that “any significant disruption to Russian exports could spark a sharp rally in prices, but the current stock builds in the U.S. are acting as a counterweight.”
Others point to the seasonal demand outlook, particularly with the northern hemisphere entering winter. “Colder weather typically boosts demand for heating oil and other refined products, which could lend support to prices,” said Maria Sanchez, an energy analyst at Wood Mackenzie.
