Oil prices jumped more than 3% yesterday, with Brent at $73.12 and WTI at $69.16, mainly due to significant supply disruptions and escalating tensions geopolitics. The immediate market reaction followed the announcement of a complete shutdown of production at Norway’s Johan Sverdrup field, Western Europe’s largest oil field producing 755,000 barrels per day, due to a power outage. electricity on dry land.
Additionally, the Chevron-operated Tengiz oil field in Kazakhstan has reduced production by 28-30% due to maintenance work on a recovery boiler, with repairs expected to continue until November 23. These combined disruptions temporarily reduced global supply by almost a million barrels per day.
U.S. Gulf Coast refineries are currently operating at the highest seasonal rates in more than three decades, processing 9.31 million barrels per day. The surge in activity is driven by strong demand for products from Mexico and Brazil, with U.S. product exports expected to reach 2.96 million barrels per day this month, the highest level in seven years . Strong export demand has pushed refining margins (3-2-1 crack margin) to their highest levels since August.
The market is also reacting to escalating tensions in the Russia-Ukraine conflict, with the Biden administration authorizing Ukraine to use U.S.-made weapons to carry out deep strikes in Russia. This development introduced an additional geopolitical risk premium into oil prices, particularly following the largest Russian airstrike on Ukraine in almost three months.
Meanwhile, major oil companies including BP, Shell and Equinor are refocusing on traditional investments in oil and gas, scaling back their energy transition plans amid concerns about the profitability of renewable energy. The strategic shift comes as the IEA forecasts peak oil demand by the end of the decade and a potential supply surplus of one million barrels per day by 2025.
The WTI market structure moved into contango for the first time since February 2024 ahead of the December contract expiration, indicating near-term glut concerns despite current supply disruptions. This technical development, combined with a widening of the Brent-WTI spread, suggests underlying market complexity as traders balance immediate supply constraints against longer-term demand uncertainties.
OIL (D1 interval)
Oil is trading near key resistance at the 23.6% Fibonacci retracement level. The RSI shows a gradual bullish divergence, with the MACD tightening towards a potential buy signal. Bulls aim to retest the 50-day SMA at $74.04, while bears focus on September lows. Source : xStation
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