Oil prices surged more than 3% yesterday, with Brent crude settling at $73.12 and WTI at $69.16, primarily driven by significant supply disruptions and escalating geopolitical tensions. The market’s immediate response came following news of a complete production halt at Norway’s Johan Sverdrup field, western Europe’s largest oil field producing 755,000 barrels per day, due to an onshore power outage.
Adding to supply concerns, Kazakhstan’s Tengiz field, operated by Chevron, has reduced output by 28-30% due to maintenance work on a waste-heat boiler, with repairs expected to continue until November 23. These combined disruptions have temporarily removed nearly 1 million barrels per day from global supply.
U.S. Gulf Coast refineries are currently operating at the highest seasonal rates in over three decades, processing 9.31 million barrels per day. This surge in activity is driven by robust product demand from Mexico and Brazil, with U.S. product exports projected to reach 2.96 million barrels per day this month, marking a seven-year high. The strong export demand has pushed refining margins (3-2-1 crack spread) to their highest levels since August.
The market is also responding to escalating tensions in the Russia-Ukraine conflict, as the Biden administration has permitted Ukraine to use U.S.-made weapons for deep strikes into Russia. This development has introduced additional geopolitical risk premium into oil prices, particularly following Russia’s largest airstrike on Ukraine in nearly three months.
Meanwhile, major oil companies including BP, Shell, and Equinor are pivoting back toward traditional oil and gas investments, scaling back their energy transition plans amid profitability concerns in renewables. This strategic shift occurs despite IEA projections of peak oil demand by decade’s end and forecasts of a potential 1 million barrel per day supply surplus by 2025.
The WTI market structure has shifted into contango for the first time since February 2024 ahead of the December contract expiration, indicating near-term oversupply concerns despite current supply disruptions. This technical development, combined with a widening Brent-WTI spread, suggests underlying market complexity as traders balance immediate supply constraints against longer-term demand uncertainties.
OIL (D1 interval)
Oil trades near key resistance at the 23.6% Fibonacci retracement level. RSI shows a gradual bullish divergence, with MACD tightening toward 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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