In a volatile trading session Monday, global oil prices showed modest gains as heightened military confrontations between Russia and Ukraine reignited geopolitical concerns, though persistent worries about Chinese demand and forecasted market oversupply continued to cap more substantial price advances.
Brent crude futures, the international benchmark, climbed 18 cents (0.3%) to reach USD 71.22 per barrel during early Asian trading hours, while U.S. West Texas Intermediate (WTI) crude futures posted a smaller increase of 6 cents (0.1%), settling at USD 67.08 per barrel.
The weekend saw a significant escalation in the ongoing conflict as Russia launched its most extensive air assault on Ukraine in nearly three months, inflicting considerable damage to the country’s critical power infrastructure. The situation became further complicated following reports that the Biden administration has reversed its previous stance, now permitting Ukraine to employ U.S.-manufactured weapons for deep strikes into Russian territory, according to three sources familiar with the decision.
Market analyst Tony Sycamore from IG Markets noted, “Biden’s decision to allow Ukraine to strike Russian forces near Kursk with long-range missiles could reintroduce geopolitical risk premiums to oil prices, particularly given the additional complexity of North Korean troops entering the conflict.”
Energy analyst Saul Kavonic of MST Marquee added a cautionary perspective: “While Russian oil exports have remained relatively stable thus far, any Ukrainian targeting of oil infrastructure could trigger significant market escalation.”
The geopolitical tensions coincide with internal challenges in Russia’s oil sector, where at least three refineries have been forced to either suspend operations or reduce production due to a combination of export restrictions, rising crude prices, and elevated borrowing costs, according to multiple industry sources.
However, broader market fundamentals continue to present headwinds for oil prices. Both major crude benchmarks recorded losses exceeding 3% last week, driven by disappointing economic data from China and the International Energy Agency’s (IEA) projection of a significant global oil surplus. The IEA forecasts that global oil supply will exceed demand by more than 1 million barrels per day in 2025, even accounting for current OPEC+ production cuts.
China’s latest economic indicators have added to market concerns, with October refinery throughput dropping 4.6% compared to the previous year, while factory output growth also showed deceleration, according to official government data released Friday. As the world’s second-largest oil consumer, China’s economic performance significantly influences global oil demand outlook.
In the United States, the oil industry continues to show signs of consolidation, with Baker Hughes reporting a decrease of one operating oil rig last week, bringing the total to 478 – the lowest level since mid-July. This development occurs against a backdrop of uncertainty regarding the U.S. Federal Reserve’s future interest rate decisions, which has created additional volatility in global financial markets.
Market participants remain focused on several key factors that could influence price movements in the coming weeks, including:
- The potential escalation of the Russia-Ukraine conflict and its impact on global energy supply chains
- China’s economic recovery trajectory and its implications for oil demand
- The effectiveness of OPEC+ production cuts in managing global supply
- U.S. Federal Reserve monetary policy decisions and their effects on market sentiment
- Development of alternative energy sources and their impact on traditional oil markets