Oil prices inched upward on Thursday, reflecting renewed supply concerns tied to escalating geopolitical tensions in the ongoing Russia-Ukraine war. The uptick comes as market participants balance shifting global demand, stockpile fluctuations, and production uncertainties.
Brent crude futures for January delivery rose 28 cents, or 0.4%, to settle at $73.09 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed by 28 cents, or 0.4%, to $69.03 per barrel.
The war in Ukraine, now in its 1,000th day, remains a central driver of oil market volatility. On Wednesday, Ukraine launched a volley of British-supplied Storm Shadow cruise missiles at Russian targets, a move that followed the use of U.S. ATACMS missiles earlier in the week. These advanced Western weapons have extended Ukraine’s reach, targeting Russian infrastructure and supply chains far from the border.
Moscow has warned that Ukraine’s use of Western-supplied long-range weaponry on Russian territory constitutes a “major escalation.” Kyiv defends its actions as necessary to weaken Russian military capabilities supporting the invasion. This intensifying conflict has reignited fears of disruptions in global energy flows, particularly in Europe, where the dependence on oil and gas remains critical despite efforts to diversify energy sources.
In the United States, crude inventories rose modestly last week, defying analysts’ expectations of a smaller build. According to the Energy Information Administration (EIA), U.S. crude stocks increased by 545,000 barrels to 430.3 million barrels in the week ending Nov. 15, surpassing the forecasted 138,000-barrel rise.
Gasoline inventories also rose more than anticipated, signaling subdued demand or potentially improved refinery output.
Distillate stockpiles, however, posted a larger-than-expected draw, indicating a tightening in supplies for products like diesel and heating oil as colder months set in.
These mixed signals suggest that while supply chains are functioning, demand dynamics and regional consumption patterns are creating pockets of uncertainty.
Adding a layer of complexity to the supply picture, Norway’s Equinor announced the restoration of full output at the Johan Sverdrup oilfield in the North Sea. The facility, which had experienced a power outage, plays a vital role in European oil supply. Its return to capacity offers some relief to the market, though geopolitical concerns overshadowed the impact of this development.
As the oil market grapples with tepid global demand and a slowdown in Chinese economic growth, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is reconsidering its production strategy.
The group, which collectively supplies around 50% of the world’s oil, had initially planned to incrementally increase production through 2024 and 2025. However, internal discussions now suggest that OPEC+ may delay these output hikes. Three sources familiar with the matter have indicated that the group could maintain current production cuts when it meets on Dec. 1.
Sluggish Global Demand: A weaker-than-expected recovery in China, coupled with broader concerns about global economic growth, has dampened the outlook for oil consumption.
Rising Non-OPEC+ Production: Increased output from producers outside the alliance, particularly in the U.S., has intensified competition and reduced the urgency for OPEC+ to ramp up its supply.
The decision-making process within OPEC+ remains nuanced, balancing the needs of member nations dependent on oil revenue with the broader objective of stabilizing prices in an uncertain market.
Global Economic Uncertainty: Central banks in major economies continue to grapple with inflation, weighing the risks of recession against efforts to maintain financial stability. These dynamics have tempered energy demand forecasts.
Seasonal Factors: With the Northern Hemisphere entering winter, heating oil demand typically rises, potentially offsetting some of the broader demand weakness.
Currency Fluctuations: A strengthening U.S. dollar, driven by monetary policy tightening, has made crude oil more expensive for holders of other currencies, curbing global buying interest.
Analysts expect that the oil market will remain highly reactive to geopolitical developments and economic indicators in the coming weeks. The interplay of the following factors will likely shape price movements:
Ukraine Conflict: Any further escalation or disruptions to supply chains could push prices higher, particularly if Russian output or transportation networks are impacted.
OPEC+ Strategy: The Dec. 1 meeting will be closely watched for signals of production policy shifts, with traders anticipating either an extension of existing cuts or a more cautious approach to supply increases.
Demand Recovery: Indicators from China and other major economies will be critical in determining whether global consumption can rebound in the near term.
