Investing
Oil nudges up after Russia-Ukraine tensions escalate
Global Banking & Finance Review®
Company
By Florence Tan
SINGAPORE (Reuters) -Oil prices edged up on Monday after fighting between Russia and Ukraine intensified over the weekend, although concerns about fuel demand in China, the world’s second-largest consumer, and forecasts of a global oil surplus weighed on markets.
Brent crude futures gained 29 cents, or 0.4%, to $71.33 a barrel by 0502 GMT, while U.S. West Texas Intermediate crude futures were at $67.20 a barrel, up 18 cents, or 0.3%.
Russia unleashed its largest air strike on Ukraine in almost three months on Sunday, causing severe damage to Ukraine’s power system.
In a significant reversal of Washington’s policy in the Ukraine-Russia conflict, President Joe Biden’s administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russia, two U.S. officials and a source familiar with the decision said on Sunday.
There was no immediate response from the Kremlin, which has warned that it would see a move to loosen the limits on Ukraine’s use of U.S. weapons as a major escalation.
“Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil as it is an escalation of tensions there, in response to North Korean troops entering the fray,” IG markets analyst Tony Sycamore said.
Saul Kavonic, an energy analyst at MST Marquee, said: “So far there has been little impact on Russian oil exports, but if Ukraine were to target more oil infrastructure that could see oil markets elevate further.
In Russia, at least three refineries have had to halt processing or cut runs due to heavy losses amid export curbs, rising crude prices and high borrowing costs, according to five industry sources.
Brent and WTI slid more than 3% last week on weak data from China and after the International Energy Agency forecasted that global oil supply will exceed demand by more than 1 million barrels per day in 2025 even if cuts remain in place from OPEC+.
China’s refinery throughput fell 4.6% in October from last year and as the country’s factory output growth slowed last month, government data showed on Friday.
Investors also fretted over the pace and extent of interest rate cuts by the U.S. Federal Reserve that has created uncertainty in global financial markets.
In the U.S., the number of operating oil rigs fell by one to 478 last week, the lowest since the week to July 19, Baker Hughes data showed.
(Reporting by Florence Tan; Editing by Sonali Paul)
Brent crude oil is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the U.S. and is known for its high quality and low sulfur content.
A global oil surplus occurs when the supply of oil exceeds demand. This can lead to lower oil prices and can affect economies reliant on oil exports.
Crude oil futures are contracts to buy or sell oil at a predetermined price at a specified time in the future. They are used by traders to hedge against price fluctuations.
Fuel demand refers to the need for fuel, such as oil and gas, in various sectors including transportation, industry, and heating. It is influenced by economic activity and consumer behavior.
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