(Bloomberg) — Oil prices increased for a third consecutive day as the situation in Ukraine worsened due to Russia’s ongoing conflict, with algorithmic traders possibly contributing to the upward momentum.
West Texas Intermediate surged past $69 a barrel following Ukraine’s military forces launching British cruise missiles at targets within Russia for the first time, prompting the Kremlin to amplify its nuclear threat. Dan Ghali, a commodity strategist at TD Securities, noted that this rise could be bolstered by algorithmic traders reducing their net short positions in crude.
Russia has expressed a willingness to discuss a potential cease-fire in Ukraine with U.S. President-elect Donald Trump, even as the conflict escalates on multiple fronts and both sides aim to enhance their negotiating leverage. Crude futures have risen over 3% since Friday.
In other news, the American Petroleum Institute reported a 4.8 million-barrel increase in crude stockpiles last week, while fuel supplies saw a decline. The U.S. Energy Information Administration is set to release official data later on Wednesday.
John Evans, an analyst at PVM Oil Associates, stated, “The Ukraine war has surged back into focus for investment markets. The oil market will once again face a tug-of-war between geopolitical factors and supply dynamics.”
Oil prices have experienced fluctuations due to conflicting signals from the two ongoing global conflicts and concerns about a potential supply surplus next year. Nevertheless, implied volatility for Brent crude has decreased since mid-last month.
In the Middle East, the U.S. is intensifying efforts to broker a cease-fire between the Lebanese militant group Hezbollah and Israel before the end of Joe Biden’s presidency, while Iran has agreed to halt uranium enrichment to near weapons-grade levels. The International Energy Agency has cautioned that global oil markets may encounter a significant surplus next year, even if the OPEC+ alliance does not resume curtailed production, amid slowing demand growth in China.
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