Oil prices stabilized on Wednesday as traders closely monitored developments in the ongoing Russia-Ukraine conflict. However, a significant increase in U.S. oil stockpiles exerted downward pressure on prices.
This week, oil prices had seen slight gains due to concerns over potential supply disruptions linked to escalating tensions in the Russia-Ukraine war. Moscow’s recent hints at possible nuclear retaliation in response to Ukrainian strikes have added to market unease. Additionally, a temporary outage at Norway’s Johan Sverdrup oilfield had briefly supported prices before production resumed on Tuesday.
As of 20:34 ET (01:34 GMT), Brent oil futures for January delivery were steady at $73.31 per barrel, while West Texas Intermediate (WTI) crude futures held at $69.22 per barrel.
The oil markets remained vigilant regarding potential supply disruptions stemming from heightened tensions in the Russia-Ukraine conflict, particularly after reports that the U.S. had authorized Ukraine to use long-range missiles. In response, Russia has lowered its threshold for a nuclear response, raising concerns among traders about further escalation.
While Ukraine has targeted Russian oil infrastructure, these actions have not yet led to significant supply disruptions. However, some relief came when Russia’s Foreign Minister stated that the country would strive to prevent a nuclear war.
Adding to market unease, industry data revealed that U.S. oil inventories rose significantly more than anticipated during the week ending November 15. According to the American Petroleum Institute, oil stockpiles increased by 4.75 million barrels last week, far exceeding the forecasted rise of 0.8 million barrels. This report often precedes similar trends in official inventory data set to be released later on Wednesday.
U.S. oil inventories have exceeded expectations for two consecutive weeks, raising concerns among traders about an oversupply from the world’s largest oil producer as demand from major importing countries weakens heading into 2025.
On Tuesday, oil prices experienced a modest uptick, building on gains from the previous day attributed to the production halt at Norway’s Johan Sverdrup oilfield. However, worries over rising tensions in the Russia-Ukraine conflict kept investors cautious. As of 04:30 GMT, Brent crude futures for January delivery rose by 15 cents, or 0.2%, to $73.45 per barrel, while U.S. WTI crude futures for December delivery also increased by 15 cents, or 0.2%, to $69.31 per barrel.
Both benchmarks saw a notable surge of over $2 per barrel on Monday following Equinor’s announcement of a suspension of output from its Johan Sverdrup oilfield due to a land-based power outage.
Kazakhstan’s largest oil field, Tengiz—operated by Chevron—has also reduced production by 28% to 30% due to ongoing repairs, further constraining global supplies. The country’s energy ministry has indicated that these repairs are expected to be completed by Saturday.
In addition, Russia launched its most extensive airstrike against Ukraine in nearly three months over the weekend, causing significant damage to Ukraine’s power infrastructure and raising concerns about future supply disruptions.
As traders shifted WTI positions toward January contracts with the December contract nearing expiration on Wednesday, market analysts noted that while Russian oil exports remain stable for now, continued targeting of oil infrastructure could lead to rising prices.
Overall, while optimism persists regarding potential price increases due to geopolitical tensions and production disruptions, recent data indicating rising U.S. inventories adds complexity to market dynamics as traders navigate these uncertain conditions.
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