Geopolitical risk is re-entering crude oil prices. The latter increased slightly on Wednesday November 20, driven by the escalation of the war between Ukraine and Russia, despite the return to full production capacity of the Norwegian Sverdrup oil field which was stopped on Monday. Around 11:25 a.m., a barrel of Brent from the North Sea for delivery in January rose 0.30% to $73.53. Its American equivalent, a barrel of West Texas Intermediate (WTI) for delivery in December, which is the last day of trading, gained 0.45% to $69.70.
Market attention “is now focused on the escalation between Russia and Ukraine”explain Energi Danmark analysts. Russia promised a response on Tuesday “appropriate” to the attack on its territory carried out by Ukraine with American ATACMS missiles, believing that the conflict was tipping into “a new phase” and announcing that the possibilities of resorting to nuclear weapons were thus broadened. On Sunday, Washington gave kyiv the green light to fire these long-range missiles on Russian soil.
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Russian infrastructure under threat
Russia is the world's second largest producer of black gold, and oil market players are raising the risk of an attack on Russian energy infrastructure with significant repercussions on prices. The geopolitical risk premium re-enters crude oil prices which “cannot ignore the two ongoing wars”also refers to the situation in the Middle East, in areas with significant oil resources, says John Evans, analyst at PVM.
Furthermore, the Johan Sverdrup oil field, shut down on Monday November 18 due to a technical incident, regained its full production capacity this Wednesday. Operated by Equinor in the North Sea, the latter represents 36% of Norway's total oil production. Stakeholders will keep an eye on the release of the U.S. Energy Information Administration's (EIA) weekly report on Wednesday.
