Following a “meaningful escalation” in tensions between Russia and Ukraine this week, crude oil futures edged higher on Wednesday. However, prices traded off the session’s highs after data showed a small rise in U.S. crude stocks over the past week.
Traders weighed worries about a possible nuclear reaction from Russia in response to Ukraine’s recent attack with U.S.-made long-range missiles against news that the Russian government was ready to talk to President-elect Trump about a possible cease-fire in Ukraine.
The price changes
- On the New York Mercantile Exchange, the price of West Texas Intermediate crude for December delivery CL.1 0.37% CLZ24 0.37% went up by 11 cents, or 0.2%, to $69.50 a barrel before the end of the session. At $69.34 in January, WTI oil CLF25 0.17% was up 10 cents, or 0.1%.
- Crude oil prices rose by 3 cents, or less than 0.1%, to $73.34 a barrel on ICE Futures Europe in January. Brent crude BRN00 0.08% BRNF25 0.07% is the world’s standard.
- RBZ24 1.04% went up 1% to $2.0572 a gallon in December, while HOZ24 -0.13% went down 0.3% to $2.2347 a gallon in December.
- The price of natural gas for delivery in December (NGZ24 7.04%) went up by 4% to $3.119 per million British thermal units.
Market forces
After Russian President Vladimir Putin accepted a change to the country’s nuclear doctrine this week, traders continued to keep an eye on what was going on in Russia and Ukraine.
The change would let Russia use nuclear weapons in response to the use of conventional weapons. It comes after the US gave Ukraine permission to use its weapons against Russian targets. Ukraine used those weapons to attack a warehouse that stored ammunition in Russia’s Bryansk area.
Tyler Richey, co-editor at Sevens Report Research, said that Russia’s changes to its nuclear doctrine and Ukraine’s attacks on Russia with advanced U.S. missile systems were “both serious developments.”
He said that the latest developments were “probably the most extreme rise in tensions between Russia and Ukraine in months, if not quarters.” However, they did not lead to a more real rally from the year-to-date lows in oil prices, he said.
Even though there are still political problems in Eastern Europe and the Middle East, Richey said, “it seems physical oil traders are becoming more focused on the core fundamental dynamics between potentially rising supply and fading demand globally.”
Also, the fact that oil prices are going up a lot right now, even though there are supply risks and people are still optimistic about economic growth after the election, is not good news for oil bulls, he said.
News stories from Reuters said that Russian President Vladimir Putin might be willing to talk to U.S. President-elect Donald Trump about a cease-fire in Ukraine. Traders were thought this over.
Data on supply
In the U.S., the Energy Information Administration said on Wednesday that crude oil and gasoline stocks rose over the past week.
The agency said that for the week ending November 15, U.S. commercial crude stockpiles went up by 500,000 barrels.
A study by S&P Global Commodity Insights found that analysts thought crude oil supplies would drop by an average of 800,000 barrels over the course of the week. A source quoting the data said that the American Petroleum Institute said late Tuesday that the amount of crude oil in stock rose by 4.75 million barrels.
The EIA report showed that gasoline supplies rose by 2.1 million barrels over the past week, while diesel supplies fell by 100,000 barrels. The S&P Global Commodity Insights study predicted that the supply of gasoline would drop by 2.5 million barrels and the supply of distillates would drop by 1.8 million barrels.
As of last week, the EIA said that U.S. oil production dropped by 199,000 barrels to 13.2 million barrels per day, and that crude oil stocks at the Cushing, Okla., Nymex shipping hub went down by 100,000 barrels to 25.1 million barrels. In the past week, total motor gasoline provided dropped from 9.383 million barrels per day the week before to 8.419 million barrels per day. This shows that people bought less gasoline.
Back in the North Sea, the Johan Sverdrup oilfield is back to work after a power loss on Monday stopped it. But production had dropped by 30% because repairs were still going on at Tengiz, Kazakhstan’s biggest oil plant.
