Oil prices have surged in Asian trade, set for a positive week as concerns over Russia and Ukraine escalate, leading traders to add a risk premium to crude. Supply disruptions in Norway, a weaker dollar, and reports of a potential OPEC+ production hike delay have all contributed to the uptrend.
Brent crude futures expiring in January have risen by 0.4% to $74.54 a barrel, while WTI crude futures have increased by 0.5% to $70.10 a barrel. Both contracts are up by 4% to 5% for the week.
Russia-Ukraine Tensions Drive Oil Price Gains
The spike in oil prices this week is primarily driven by concerns over potential supply disruptions due to the ongoing Russia-Ukraine conflict. Tensions have escalated further as Kyiv has started using Western-made long-range missiles, prompting Russia to lower its threshold for nuclear retaliation.
Recent reports indicate that Russia fired a hypersonic medium-range ballistic missile at a Ukrainian target, with President Vladimir Putin warning of more to come. The market is worried that Ukraine could damage Russia’s energy infrastructure, leading to disruptions in oil production and tightening global supplies.
In addition to geopolitical factors, oil prices have also been supported by bargain buying following significant losses in October amid fears of slowing demand, particularly in China.
OPEC+ Considers Delaying Production Increase
According to Reuters, OPEC+ is contemplating postponing a planned production hike to the following year, citing ongoing concerns about weakening demand and prices. Initially scheduled to boost production later this year, the cartel has repeatedly pushed back these plans and is expected to do so again at its upcoming meeting on December 1.
The possibility of a supply glut from non-OPEC sources is also expected to weigh on oil prices in the near future, prompting analysts to forecast a potential oversupply. This outlook has made OPEC cautious about ramping up production levels.
Overall, the current surge in oil prices is primarily driven by geopolitical tensions between Russia and Ukraine, as well as uncertainties surrounding OPEC’s production plans. Investors should closely monitor these developments to make informed decisions about their portfolios.
