Oil rises after investors weigh escalation of Russia-Ukraine war amid rise in US crude stock; Brent at $73

International crude oil prices were steady on Wednesday, November 20, as the escalating war between major oil producer Russia and Ukraine offset a rise in US crude and gasoline stocks. Prices have been buffeted by mixed signals on the two conflicts currently roiling world markets, and the prospect of a supply surplus next year. Oil’s longstanding geopolitical risk premium has faded in recent months.

Brent crude futures for January were last down four cents, or 0.05 per cent, at $73.27 a barrel. US West Texas Intermediate crude futures for December, due to expire on Wednesday, were up 26 cents, or 0.37 per cent, at $69.65, while the more active WTI contract for January was last up two cents, or 0.03 per cent, at $69.26. Back home, crude oil futures last traded 0.56 per cent lower at ₹5,825 per barrel on the multi commodity exchange (MCX).

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What's weighing on crude oil prices?

-US crude stocks and gasoline inventories rose and distillate stockpiles fell in the week ending November 15, the Energy Information Administration (EIA) said on Wednesday. Crude inventories rose by 545,000 barrels to 430.3 million barrels, the EIA said, compared to analysts' expectations for a 138,000-barrel rise. US gasoline stocks rose by 2.1 million barrels to 208.9 million barrels. This compared to analysts' expectations for a 900,000-barrel build.

-The escalating war between major oil producer Russia and Ukraine and subsequent concern around potential oil supply disruptions have kept a floor under prices this week. This has put geopolitical risk back in the market However, the concerns over additional sanctions or disruptions of Russian fuel or crude oil supplies appear misguided due to strong Russian fuel exports.

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-Long positions in WTI have declined significantly despite the added geopolitical risk, according to analysts with hedge funds holding only 50 per cent of summer levels, per CFTC data. Brent oil prices to stay supported above the $70 level for now, as market participants continue to monitor the geopolitical developments.

-On Tuesday, Ukraine used US-supplied ATACMS missiles to strike Russian territory for the first time, Moscow said, while Russian President Vladimir Putin lowered the bar for a possible nuclear attack. The price action in the oil market has been relatively uneventful post-US election, with some pick-up in the past couple of days due to a temporary production outage in the North Sea and a further escalation in the nature of the confrontation in Ukraine.

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-Norway's Equinor on Wednesday said it had restored full output capacity at the Johan Sverdrup oilfield in the North Sea following a power outage. According to Reuters, Equinor last month said the field was producing at peak capacity of around 755,000 barrels of crude oil equivalent per day.

-Weighing on prices on Wednesday, Hezbollah chief Naim Qassem said in a televised speech that his group had reviewed and given feedback on a US -drafted ceasefire proposal to end fighting with Israel, and that a halt to hostilities was now in Israel's hands.

-Meanwhile, the US Federal Reserve will trim interest rates next month but make shallower cuts in 2025 than expected just a month ago due to the risk of higher inflation from President-elect Donald Trump's proposed policies, according to most economists in a Reuters poll. Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil. 

-The expiration of WTI’s December contract on Wednesday also contributed to choppy trading. "Key support levels for crude oil stand at $68.85-68.10, with resistance at $69.95-70.55. In INR terms, crude oil has support at ₹5,770-5,700 and resistance at ₹5,890-5,940," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.