Oil Prices Increase as Russia-Ukraine Tensions Heighten
Prices of crude oil increased as Russia-Ukraine tensions heightened. Ukraine fired a US-made missile into Russia earlier in the week. Brent crude rose to $73.08 per barrel, while the US benchmark West Texas Intermediate also increased to $69.05 per barrel.
Ukraine has fired UK-made Storm Shadow missiles into Russia for the first time, according to multiple British media reports on Wednesday.
The attack comes a day after Ukraine’s first use of US long-range ATACMS missiles on Russian soil, following authorization from US President Joe Biden. The Guardian reported earlier this week that the UK would soon approve the use of Storm Shadow missiles to target Russian territory.
Earlier, UK Prime Minister Sir Keir Starmer said the international community had to “double down” in its support for Ukraine. Russian President Vladimir Putin signed on Tuesday a decree approving Russia’s updated nuclear doctrine, nearly two months after he proposed the changes.
Meanwhile, data from the Energy Information Administration (EIA) released late Wednesday revealed a 0.1% increase in US commercial crude oil inventories for the week ending Nov. 15.
Inventories rose by around 500,000 barrels to 430.3 million barrels, higher than the market prediction of a 400,000-barrel rise. Over the same period, gasoline inventories rose by around 2.1 million barrels to 208.9 million barrels.
The higher-than-expected inventory gains signaled weakening demand in the country and limited the upward trend in prices. But oil prices edged lower yesterday despite growing geopolitical risks related to Russia and Ukraine.
For oil, the risk is if Ukraine targets Russian energy infrastructure, while the other risk is uncertainty over how Russia responds to these attacks.
However, as mentioned earlier in the week, Iran’s pledge to stop stockpiling uranium does counter some of the geopolitical risk, with it potentially reducing some of the supply risks related to Iran ahead of President-elect Trump entering office.
EIA weekly data yesterday showed that US commercial crude oil inventories increased by 545,000 barrels over the last week with stronger crude oil imports almost offset by stronger crude exports.
For refined products, gasoline stocks increased by 2.05 million barrels, while distillate stocks fell by 114,000 barrels. The gasoline build came about despite refiners reducing utilisation rates by 1.2pp over the week.
Lower refinery activity was more than offset by weaker implied demand. Gasoline demand fell by 964k b/d week on week. European natural gas has been unable to escape the rising tension between Russia and Ukraine.
TTF settled almost 2.5% higher yesterday on the back of this growing geopolitical risk, while the market is also keeping a close eye on Russian pipeline flows to Europe after Gazprom halted supplies to OMV.
However, up until now, Russian pipeline flows via Ukraine have remained stable. Meanwhile, European gas storage has fallen below 90% and is also now just below the 5-year average of 91% for this time of year. #Oil Prices Increase as Russia-Ukraine Tensions Heighten FG Earmarks N47.5bn for Upgrade of 50 Selected Schools
