Oil Prices Jump 2% on Supply Disruptions in Russia, U.S.

Oil prices surged by approximately 2% on Monday due to growing concerns about global energy supplies. The increase was prompted by a Ukrainian drone strike on Russia’s Novatek fuel terminal, as well as ongoing challenges in U.S. crude production caused by extreme cold weather.

The Brent March crude futures closed at $80.06 per barrel, marking a gain of $1.50 or 1.9%. The February delivery of the U.S. West Texas Intermediate crude futures contract (WTI) concluded at $75.19, marking a $1.78 increase, or a 2.4% rise. The March WTI contract saw a significant increase, rising by $1.36 to reach $74.61.

John Kilduff, a partner at Again Capital LLC, has raised concerns in the market regarding genuine supply disruptions. He specifically mentioned the drone strike that caused portions of the Novatek terminal to be idled. Severe cold weather is impacting crude oil output in North Dakota and other states, according to Phil Flynn, an analyst with Price Future Group.

According to North Dakota’s pipeline authority, more than 20% of production in the third largest oil producing state is still offline due to severe weather conditions and operational difficulties. This comes after output was reduced by 50% last week.

In a recent statement, Flynn highlighted the ongoing growth of stock markets, citing increased demand expected in the upcoming months. “There is a decreasing sense of pessimism surrounding the economy,” he stated. The S&P 500 reached a new record high, continuing its upward trend into the new week thanks to strong performance from large-cap and chip stocks.

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Israel’s offensive in Gaza shows no signs of stopping, as attacks by Iran-aligned Houthis on commercial vessels in the Red Sea persist despite retaliatory actions taken by the United States. Oil fundamentals may continue to weigh on prices, as suggested by IG analyst Tony Sycamore.

According to the speaker, there has been an increase in oil production. However, the growth outlook in China and Europe is uncertain, with mixed results. Additionally, data expected to be released this week suggests a significant slowdown in U.S. economic growth.

“Investors are eager to adopt a bullish stance, however, they find themselves in a cautious position due to tepid data and a narrative of caution from policymakers,” stated Tamas Varga, an oil broker at PVM.

According to the latest forecasts by the U.S. Energy Information Administration, the International Energy Agency, and the Organization of the Petroleum Exporting Countries, demand growth for 2024 is projected to be between 1.24 million and 2.25 million barrels per day. However, all three organizations anticipate a slowdown in demand growth in 2025.

Production at Libya’s Sharara oilfield has resumed, according to the state oil company NOC. The halt in output, which began in early January due to a sit-in by protesters, has now come to an end.