Oil prices edged higher on Monday amid escalating tensions between Russia and Ukraine but remained weighed down by concerns over China’s fuel demand and forecasts of a global oil surplus. Brent crude rose 18 cents, or 0.3%, to $71.22 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 6 cents, or 0.1%, to $67.08 by 0713 GMT.
The rise followed Russia’s largest airstrike on Ukraine in nearly three months, severely damaging Ukraine’s power infrastructure. In a notable policy shift, the Biden administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russian territory, including targets near Kursk. Analysts suggest this escalation could increase geopolitical risks in oil markets.
Energy analyst Saul Kavonic noted that while Russian oil exports have remained largely unaffected so far, potential Ukrainian attacks on Russian oil infrastructure could elevate prices. Meanwhile, three Russian refineries have scaled back operations due to export restrictions, rising crude costs, and high borrowing expenses.
Despite the geopolitical tensions, Brent and WTI fell over 3% last week due to weak economic data from China and an International Energy Agency forecast predicting a global oil surplus by 2025. China’s refinery throughput dropped 4.6% year-on-year in October, while factory output growth also slowed.
Uncertainty over the Federal Reserve’s interest rate policies has further pressured markets, alongside a decline in active U.S. oil rigs, which dropped to their lowest count since July, according to Baker Hughes.
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