Crude Oil prices rally as Russia and Ukraine fight on

Oil prices slightly increased on Monday after fighting between Russia and Ukraine escalated over the weekend. However, markets were impacted by worries about fuel demand in China, the world’s second-largest consumer, and predictions of an oil glut worldwide.

Brent crude futures increased 40 basis points to trade at about $71.4 per barrel, while U.S. West Texas Intermediate crude futures were up 30 basis points at $67.2  a barrel after Russia launched its biggest airstrike against Ukraine in nearly three months on Sunday, severely damaging Ukraine’s electrical infrastructure.

President Joe Biden’s administration permitted Ukraine to use U.S.-made weapons to attack main Russia, authorities with knowledge of the decision stated on Sunday.

Weak data from China and the International Energy Agency’s forecast that the world’s oil supply will exceed demand by more than 1 million barrels per day in 2025, despite OPEC+ cuts, caused Brent and WTI to drop more than 3 percent last week. According to government data released on Friday, China’s refinery throughput decreased 4.6 percent in October compared to the same month in 2023 as the country’s factory output growth slowed last month.

China’s crude oil surplus almost halved in October as refinery runs and imports declined, Excess crude decreased from 930,000 barrels per day (bpd) in September to approximately 550,000 bpd in October.

However, 2024 is far from a typical year for China’s oil industry. Under normal conditions, a decrease in the amount of crude entering inventories was a sign that demand was increasing.

There was a reduction in the quantity of spare crude because oil imports decreased more than refinery throughput last month. An estimate can be obtained by subtracting the amount of processed crude from the total amount available from imports and domestic production. China, the largest importer of crude in the world, does not reveal the volumes of oil flowing into or out of strategic and commercial stockpiles.