Biden-backed Escalation of Russia/Ukraine War Causes 3% Jump In Oil

Meanwhile, it's unclear when Equinor's Johan Sverdrup oilfield will resume output: File Image/Pixabay

Following U.S. president Joe Biden reportedly allowing Ukraine to strike far into Russia with U.S.-made weapons, Washington on Monday said Russia escalated the conflict further by deploying troops from North Korea – and this caused an instant escalation of oil prices by over 3 percent.

Brent settled up $2.26, or 3.2 percent, at $73.30 per barrel, while West Texas Intermediate settled up $2.14, also 3.2 percent, at $69.16 per barrel.

Russia earlier unleashed its largest air strike on Ukraine in almost three months, causing major damage to that country's power system, and Saul Kavonic, an energy analyst at MST Marquee, noted that oil prices could rise further if Ukraine targets more oil infrastructure.

Tony Sycamore, analyst at IG, added, "Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil, as it is an escalation of tensions there in response to North Korean troops entering the fray."

Trading on Monday was also spurred by Equinor disclosing it had halted output from its Johan Sverdrup oilfield, Western Europe's largest, due to a power outage, and it was not clear when production would resume.

But while the analytical community was suddenly concerned with supply tightness due to these two events, Bloomberg on Monday maintained its worry about oversupply.

The news agency pointed out that the prompt spread, which measures the difference in price between futures for immediate delivery and those a month later, "traded in negative territory for the first time since February," reflecting contango, "a signal that near-term supplies are ample" and a "sign of oversupply in the U.S."

In other oil news on Monday, the latest data from the Joint Organizations Data Initiative showed  that Saudi Arabia's crude oil exports increased by 80,000 barrels per day (bpd) to 5.75 million bpd in September, the highest in three months.

Saudi oil production fall slightly by 17,000 bpd to 8.98 million bpd in September, while refinery runs hit a four-month high of 2.7 million bpd, up by 35,000 bpd from August; the output was in keeping with the Kingdom's earlier promise to keep production at "around 9 million bpd" in conjunction with the Organization of the Petroleum Exporting Country's (OPEC) voluntary 1 million bpd reduction.