Oil Prices Surge 2% Amid Russia-Ukraine Tensions

Oil prices surged nearly 2% on Thursday as escalating tensions between Russia and Ukraine unsettled markets, raising fears over potential disruptions to crude supplies if the conflict intensifies.

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Russian President Vladimir Putin announced that Russia had carried out a hypersonic medium-range ballistic missile strike on a Ukrainian military target. He also issued a warning to the West, stating that Moscow might target military facilities in any country supplying weapons used against Russia.

Putin accused Western nations of escalating the Ukraine conflict by enabling Kyiv to strike Russian territory with long-range missiles. He described the war as evolving into a global confrontation. This week, Ukraine launched strikes within Russia using U.S. and British missiles, despite Moscow’s warnings that such actions represent significant escalation.

Brent crude futures increased by $1.42 (1.95%) to settle at $74.23 per barrel, while U.S. West Texas Intermediate crude rose by $1.35 (2%), reaching $70.10.

“The market has shifted its focus to rising concerns over the escalation of the war in Ukraine,” said Ole Hvalbye, a commodities analyst at SEB.

As the world’s second-largest exporter of crude oil, Russia plays a critical role in global supply, and any significant disruptions could have widespread implications.

Analysts at ING cautioned, “For oil, the risks lie in Ukraine potentially targeting Russian energy infrastructure and the uncertainty surrounding Russia’s response to such actions.”

However, oil prices were tempered by a reported increase in U.S. crude inventories. Stocks rose by 545,000 barrels to a total of 430.3 million barrels for the week ending November 15, surpassing analysts’ forecasts. Data from the Energy Information Administration also indicated larger-than-expected rises in gasoline stocks, though distillate inventories saw a sharper-than-predicted decline.

China introduced measures on Thursday to bolster trade, including initiatives to support energy imports, amid concerns about potential trade restrictions under U.S. President-elect Donald Trump’s administration.

Meanwhile, OPEC+ might reconsider plans to raise production during its December 1 meeting due to sluggish global oil demand, according to three sources familiar with the alliance’s discussions. The OPEC+ coalition, which comprises OPEC members and allied producers like Russia, accounts for about half of the world’s oil production. Originally, the group planned to phase out production cuts gradually starting late 2024 and into 2025.

In a separate development, Chicago Federal Reserve President Austan Goolsbee reaffirmed his support for further interest rate cuts, albeit at a slower pace. Prolonged higher borrowing costs could suppress economic activity and dampen oil demand.