Oil Heads for Weekly Advance as Russia-Ukraine War Escalates

(Bloomberg) -- Oil headed for the biggest weekly gain since early October on an escalation of hostilities between Russia and Ukraine.

Brent traded above $74 a barrel, up more than 4% for the week, and West Texas Intermediate was near $70. The war has rapidly intensified following months of bloody attrition, with Russia launching a ballistic missile after the expanded use of Western-provided long-range weapons by Ukrainian forces.

Oil has swung between weekly gains and losses since mid-October, influenced by the push and pull of various factors from a strong dollar to ample supply. The Kremlin also revamped its nuclear doctrine this week, although Russia’s foreign minister sought to calm worries about a nuclear escalation.

“There’s an element of uncertainty as to how far each party could go in its attacks, which is injecting some anxiety into the oil market,” said Vandana Hari, founder of Vanda Insights in Singapore. The intensification of the conflict has added a risk premium of $3 to $4 a barrel, she added.

The US, meanwhile, sanctioned Russia’s Gazprombank, closing a loophole that Washington kept open over the course of the war because the lender is key for energy markets. The penalties increase the risk of a cut-off of some of the remaining Russian gas flows to a handful of central European nations.

Still, the oil market faces a sizeable supply glut in 2025, with investors watching for a decision from OPEC+ on plans to revive idled production. That would likely coincide with persistent weak demand from China, as the Asian nation struggles to pull its economy out of a sustained slump.

©2024 Bloomberg L.P.