Oil rises 2% on supply worries as Russia-Ukraine war intensifies

Oil rose nearly 2 percent on Thursday as tensions between Russia and Ukraine rose rapidly as the countries fired missiles at each other, raising concerns about crude supplies if the conflict widens.

Russian President Vladimir Putin said on Thursday that Russia had launched a hypersonic medium-range ballistic missile attack on a Ukrainian military facility and warned the West that Moscow could strike the military facilities of any country whose weapons have been used against Russia.

Putin said the West was escalating the conflict in Ukraine by allowing Kiev to hit Russia with long-range missiles and that the war was becoming a global conflict.

Ukraine fired US and British missiles at targets in Russia this week, despite warnings from Moscow that it would see such action as a major escalation.

Brent crude futures were up $1.42, or 1.95 percent, at $74.23 a barrel, while U.S. West Texas Intermediate crude futures were up $1.35, or 2 percent. , up to $70.10.

“Market focus has now shifted to heightened concerns about an escalation of the war in Ukraine,” said Ole Hvalbye, commodities analyst at SEB.

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Russia is the world’s second-largest crude exporter after Saudi Arabia, so major disruptions could impact global supplies.

“For oil, the risk is if Ukraine targets Russian energy infrastructure, while the other risk is uncertainty over how Russia responds to these attacks,” ING analysts said in a note.

A rise in US crude inventories of 545,000 barrels to 430.3 million barrels in the week ended Nov. 15 weighed on the market, beating analysts’ expectations.

Gasoline inventories last week rose more than estimates, while distillate inventories saw a bigger-than-expected drawdown, according to Energy Information Administration data.

China on Thursday announced policy measures to boost trade, including support for energy imports, amid concerns over US President-elect Donald Trump’s threats to impose tariffs.

OPEC+ could again reject a production increase when it meets on Dec. 1 because of weak global oil demand, three OPEC+ sources familiar with the discussions said.

The group, which brings together the Organization of the Petroleum Exporting Countries and allies such as Russia, pumps about half of the world’s oil. It initially planned to gradually reverse production cuts from late 2024 and into 2025.

Meanwhile, Chicago Federal Reserve President Austan Goolsbee on Thursday reiterated his support for further interest rate cuts and openness to doing them more slowly.

Slower-than-expected declines in interest rates are keeping the cost of borrowing high in the meantime, which may slow economic activity and reduce demand for oil. Reuters