Crude Oil and Gasoline Prices Surge Amid Ongoing Geopolitical Tensions
On Thursday, January WTI crude oil (CLF25) closed up +1.35 (+1.96%), while January RBOB gasoline (RBF25) increased by +0.0105 (+0.53%).
Geopolitical Tensions Fuel Rising Crude Prices
Crude oil and gasoline prices reached their highest in a week, buoyed by the ongoing conflict between Ukraine and Russia. Recent missile strikes by Russia on Dnipro, Ukraine, continued to exert upward pressure on oil prices. However, gains were somewhat restrained by a rise in the dollar index (DXY00), which marked a 13-month high.
Escalation of Conflict and Its Market Impact
The intensifying Ukraine-Russian conflict is firmly supporting crude prices. Following the launch of long-range missiles by Russia, Ukraine retaliated with British cruise missiles aimed at military objectives in Russia for the first time. This escalation came after the UK authorized Ukraine to take such actions in response to Russia’s military maneuvers, including the deployment of North Korean troops. Furthermore, Ukraine’s targeting of a border region in Russia using US-supplied missiles prompted an update to Russia’s nuclear policy, allowing for a broader use of atomic weapons if threatened.
Mixed Signals from the Middle East
In a potentially stabilizing development, the IAEA announced that Iran has agreed to halt uranium enrichment close to weapons-grade levels, which could ease regional tensions. Additionally, Hezbollah’s acceptance of a US-led cease-fire proposal with Israel might also weigh on crude prices.
Declining Global Oil Storage Boosts Prices
Market dynamics shifted positively with a noticeable decrease in crude oil stored on tankers. Vortexa reported a 14% decline to 50.97 million barrels for the week ending November 15, reflecting tightening supplies.
Concerns in the Middle East and Chinese Demand
Despite favorable conditions, warnings from Iranian leadership about a “crushing response” to Israeli airstrikes suggest that Middle East tensions may still escalate, potentially disrupting oil supply routes. Conversely, China’s oil demand has weakened, with October’s figures showing a 5.4% year-over-year drop to 14.07 million barrels per day (bpd). For the year through October, demand fell 4.03% to 14.00 million bpd, marking China as the world’s second-largest consumer of crude.
Russian Export Declines and US Production Shifts
In a supportive sign for crude prices, Russian crude exports recently fell by 740,000 bpd to a four-month low of 2.83 million bpd. Also, data from Russia’s Energy Ministry indicated that September production was 8.97 million bpd, reflecting a slight decrease from August.
Insights from the EIA and Rig Counts
The latest EIA report from November 15 highlighted that US crude oil inventories were 4.5% lower than the seasonal five-year average, while gasoline and distillate stocks were also down by 4.0% and 4.5%, respectively. US crude production has dipped by 0.7% to 13.4 million bpd, a pullback from the record output of 13.5 million bpd. Meanwhile, Baker Hughes reported a slight decrease in active US oil rigs, which fell to 478, just above a recent low.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
