Oil prices rose 1% to a two-week high as war in Ukraine escalates

Oil prices rose about 1 percent on Friday (Nov. 22), settling at a two-week high as the intensifying war in Ukraine increased the market’s geopolitical risk premium this week.

Brent crude futures rose US$0.94, or 1.3 percent, to settle at US$75.17 a barrel. WTI crude rose US$1.14, or 1.6 percent, to settle at US$71.24.

Both benchmark oil prices rose about 6 percent for the week, the highest since Nov. 7, when Moscow stepped up its offensive in Ukraine after Britain and the United States allowed Kyiv to strike deep into Russia with its missiles.

“The escalation of Russian-Ukrainian relations has raised geopolitical tensions above levels seen during the year-long conflict between Israel and Iran-backed militants,” said Saxo Bank analyst Ole Hansen.

President Vladimir Putin said Russia will continue to test its new Oreshnik hypersonic missile in combat conditions and has a stockpile ready for use. Russia fired a missile at Ukraine following Ukraine’s use of US ballistic missiles and British cruise missiles to target Russia.

“The market fears an accidental disruption of any part of the oil, gas and refining industry would not only cause long-term damage, but would also accelerate the war spiral,” said PVM analyst John Evans.

Meanwhile, the US imposed new sanctions on Russia’s Gazprombank as President Joe Biden stepped up action to punish Moscow for its invasion of Ukraine before he leaves office on January 20.

The Kremlin said the new US sanctions were an attempt by Washington to prevent Russian gas exports, but noted that a solution would be found.

The US has also banned imports of food, metals and other goods from about 30 other Chinese companies over alleged forced labor involving Uyghurs.

China, the world’s largest oil importer, announced policy measures this week to boost trade, including support for energy imports, amid concerns about US President-elect Donald Trump’s threats to impose tariffs.

China’s crude oil imports should rebound in November, according to analysts, traders and ship tracking data.

Oil imports also increased in India, the world’s third-largest oil importer, as domestic consumption increased, government data showed.

Limiting price increases

Pressuring prices on Friday, euro zone business activity unexpectedly worsened sharply this month as the bloc’s dominant services sector contracted and manufacturing plunged into a deep recession.

In contrast, S&P Global said its composite U.S. output PMI index, which tracks the manufacturing and services sectors, rose to its highest level since April 2022, with the services sector accounting for the bulk of the gain.

But as business activity indicators in the US and Europe move in opposite directions, the US dollar has jumped to a two-year high against a basket of other currencies.

A stronger dollar makes oil more expensive in other countries, which could reduce demand.

In Germany, Europe’s largest economy, the economy grew less than previously expected in the third quarter, the statistics office said on Friday. REUTERS