Oil Prices Rise Amid Geopolitical Tensions
Oil prices increased on Monday due to escalated conflict between Russia and Ukraine, raising concerns about supply disruptions. However, worries over Chinese fuel demand and a potential global oil surplus limited gains.
By 09:15 ET (14:15 GMT), U.S. crude futures were up 1.4% at $67.86 per barrel, and Brent contracts rose 1.5% to $72.12 per barrel.
Ukraine to Strike Deep into Russia?
According to reports on Sunday, the Biden administration has allowed Ukraine to utilize U.S.-made weapons for deep strikes within Russia as a response to Russia's enlistment of North Korean ground troops. This decision elevates the conflict in Ukraine and has prompted warnings from senior Russian lawmakers about the possibility of World War Three.
Despite limited immediate impact on Russian oil exports from the war, further attacks on oil infrastructure could push oil markets to consider geopolitical factors more seriously.
Supply Glut and Chinese Economic Concerns
Current restrictions on oil price gains stem from traders' anxiety regarding China's economic health and expectations of excess supply in upcoming months. Analysts at ING noted, "Persistent worries over the clouded demand outlook in China and ample global supply outlook for next year continue to restrict any major price gains."
Last week saw benchmark contracts fall over 3% due to weak Chinese economic data and forecasts by the International Energy Agency, suggesting that global oil supply may exceed demand by 2025, even with continued production cuts from leading providers.
EIA data indicates that U.S. oil production is nearing record levels. The market's direction may also shift following Chris Wright's appointment as the next Secretary of Energy, reflecting the incoming administration's interest in boosting domestic fossil fuel production.
Latest Positioning Data
Recent positioning data has revealed significant speculative selling in benchmark contracts over the past week. ING reported that speculators reduced their net long positions, resulting in a total of 103,539 lots, while money managers added substantial short positions, marking the biggest weekly increase since September.
For NYMEX WTI, speculators decreased their net long positions by 18,043 lots, totaling 125,942 lots for the week ending November 12.
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