Oil prices saw an increase on Monday as the conflict between Russia and Ukraine intensified, leading to concerns about potential disruptions in supplies. However, gains were tempered by worries about fuel demand in China and the possibility of a global oil surplus next year.
As of 09:15 ET (14.15 GMT), the futures for oil traded 1.4% higher at $67.86 a barrel, while the contract rose 1.5% to $72.12 a barrel.
Ukraine’s Ability to Strike Deep into Russia
Reports emerged on Sunday that President Joe Biden’s administration had given Ukraine approval to use US-made weapons to strike deep into Russia in response to Russia’s deployment of North Korean ground troops. This decision has raised concerns about the escalation of the conflict and the potential for wider geopolitical implications.
While there has been little impact on Russian oil exports thus far, further targeting of oil infrastructure by Ukraine could lead to increased volatility in the oil markets.
Supply Glut and Chinese Economic Concerns
Despite the uptick in oil prices, traders remain cautious due to uncertainties surrounding the Chinese economy and the likelihood of excess oil supply in the coming months.
Analysts at ING pointed out that persistent worries about the demand outlook in China and the surplus in global oil supply for the upcoming year are dampening any significant price gains.
Last week, benchmark oil contracts experienced a more than 3% decline following weak data from China and the International Energy Agency’s forecast of a surplus in global oil supply in the future.
Analysis and Breakdown
The escalating conflict between Russia and Ukraine has led to an increase in oil prices, with concerns about potential supply disruptions. However, the market remains cautious due to uncertainties surrounding the Chinese economy and the likelihood of excess oil supply in the future.
Investors should monitor the situation closely as any further escalation in the conflict could lead to increased volatility in the oil markets. Additionally, developments in China’s economy and global oil supply should be watched closely to assess the impact on oil prices and investment decisions.