The possible easing of geopolitical risks weighs on crude oil prices

January WTI Crude Oil (CLF26) closed Tuesday down -0.68 (-1.15%) and January RBOB Gasoline (RBF26) closed down -0.00386 (-2.07%).

Crude oil and gasoline prices fell on Tuesday in hopes of ending the Russian-Ukrainian war as key parties exchange various peace plans. The end of the war could allow restrictions on Russian energy exports to be lifted, increasing global oil supplies.

However, crude oil has support after Interfax reported Tuesday that Russian President Putin threatened to attack ships from nations helping Ukraine if attacks on Russian ships do not stop. Over the past week, four Russian oil tankers were attacked by drones in the Black Sea. Additionally, Ukrainian drone and missile attacks over the weekend damaged a Russian oil terminal in the Baltic Sea, forcing it to shut down. The Caspian Pipeline Consortium, which transports 1.6 million bpd of Kazakhstan’s crude exports, was forced to shut down after a pipeline was damaged at one of its berths.

Vortexa reported on Monday that crude oil stored in tankers that have been parked for at least 7 days increased +12% p/p to 124.64 million barrels in the week ending November 28, the highest level in almost 2.5 years.

Last month, OPEC revised its third-quarter global oil market estimates from a deficit to a surplus, as U.S. production exceeded expectations and OPEC also increased crude output. OPEC said it now sees a surplus of 500,000 bpd in global oil markets in the third quarter, up from last month’s estimate of a deficit of -400,000 bpd. Additionally, the EIA raised its 2025 U.S. crude production estimate to 13.59 million bpd from 13.53 million bpd last month.

Venezuelan geopolitical risks are supporting crude oil prices after President Trump said airspace over Venezuela should be considered closed. Venezuela is the twelfth largest oil producer in the world.

Reduced crude oil exports from Russia are propping up crude oil prices. On November 19, Vortexa data showed that Russia’s oil product shipments fell to 1.7 million bpd in the first 15 days of November, the lowest level in more than three years. Ukraine has attacked at least 28 Russian refineries in the past three months, exacerbating fuel shortages in Russia and limiting Russia’s crude oil export capabilities. Ukraine eliminated between 13% and 20% of Russia’s refining capacity in late October, cutting output by up to 1.1 million bpd. New US and EU sanctions on Russian oil companies, infrastructure and tankers have also curbed Russian oil exports.

Crude oil also gained support after OPEC+ said on Sunday it will stick with its plans to pause production increases during the first quarter of 2026.

OPEC+, at its November 2 meeting, announced that members will increase production by +137,000 bpd in December, but will then pause production increases in the first quarter of 2026 due to the emerging global oil surplus. In mid-October, the IEA forecast a record global oil surplus of 4.0 million bpd by 2026. OPEC+ is trying to restore the entire 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of output to restore. OPEC crude oil production in October increased by +50,000 bpd to 29.07 million bpd, the highest in two and a half years.

The consensus is that Wednesday’s EIA weekly crude oil inventories will fall by -2.0 million bbl and gasoline supplies will increase by +1.0 million bbl.

Last Wednesday’s EIA report showed that (1) US crude oil inventories as of November 21 were -3.8% below the 5-year seasonal average, (2) gasoline inventories were -3.3% below the 5-year seasonal average, and (3) distillate inventories were -6.9% below the 5-year seasonal average. US crude oil production in the week ending November 21 fell -0.1% p/p to 13.814 million bpd, retreating further from the all-time high of 13.862 million bpd in the week of November 7.

Baker Hughes reported last Wednesday that the number of active oil rigs in the United States in the week ending November 28 fell -12 to a 4-year low of 407 rigs. Over the past two and a half years, the number of US oil rigs has fallen sharply from the five-and-a-half-year high of 627 rigs reported in December 2022.

On the date of publication, Rich Asplund had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com