Oil News: Tensions in Ukraine Drive Crude Oil Higher Amid Bearish Market Sentiment

Light Crude Oil Futures Edge Higher Following Early Weakness

Light crude oil futures saw an early dip on Monday, briefly falling to $66.53 before rebounding. The initial drop breached the October 29 support at $66.62 but stopped short of testing the October 1 low of $65.65.

Despite the recovery, resistance remains at key technical levels, notably the long-term Fibonacci level at $68.52 and the 50-day moving average of $69.82. A sustained break above $69.82 is necessary to shift the intermediate trend upward.

Traders are closely watching $66.53 as the next critical downside level, with $65.65 emerging as the next potential support in the event of a further decline.

At 10:28 GMT, Light Crude Oil futures are trading $67.48, up $0.56 or +0.84%.

Geopolitical Tensions Push Oil Prices Higher

Oil prices found support on escalating tensions between Russia and Ukraine. Over the weekend, President Biden’s administration approved Ukraine’s use of U.S.-made weapons to strike targets in Russia, marking a significant policy shift. While this decision is intended to bolster Ukraine’s capabilities, analysts warn it could trigger further instability.

Russia conducted its largest air assault on Ukraine in three months, targeting critical infrastructure. Additionally, disruptions at three Russian refineries, caused by rising crude prices and export restrictions, have added to global supply concerns.

Weak Chinese Demand Limits Oil Price Gains

China’s sluggish oil demand continues to weigh on market sentiment. October refinery throughput dropped 4.6% year-on-year, aligning with a broader slowdown in industrial activity.

Chinese crude imports also declined, falling to 10.53 million barrels per day (bpd) in October, 2% lower than September levels. Despite the drop in imports, domestic crude production rose 2.5% year-on-year to 4.04 million bpd, contributing to a reduced oil surplus.

China’s demand struggles have been a bearish factor for oil markets, as optimism for a post-pandemic economic surge has given way to subdued growth expectations and growing electric vehicle adoption.

OPEC+ Cuts and Global Surplus Add Bearish Pressure

Last week, both Brent and WTI crude dropped over 3%, reflecting bearish sentiment fueled by weak Chinese data and a forecast from the International Energy Agency (IEA) projecting a global oil surplus of 1 million bpd by 2025.

The prospect of an oversupplied market persists despite ongoing output cuts from OPEC+. In the U.S., Baker Hughes reported a decline in operating oil rigs, falling to 478, the lowest since mid-July.

Oil Prices Forecast: Bearish Outlook

While geopolitical risks may provide temporary support, the market outlook remains bearish due to weakening demand signals from China and the IEA’s surplus forecast.

A decisive move below $66.53 could lead to further downside, with $65.65 as the next target. Without a break above $69.82, any rally is likely to face strong resistance. Traders should prepare for continued downward pressure in the near term.