Ukraine attack shakes markets, oil rises 2.5% on Russian supply concerns
Oil prices rose as much as 2.5% on Friday, as global supply concerns escalated after reports of a Ukrainian drone attack on a major Russian oil export hub.
A limited rally on a day of weekly losses
Brent crude touched $64.10 per barrel, while WTI crude climbed to $60.20 per barrel.
The daily rally comes despite futures heading for weekly losses, with prices still down around 15% since the start of 2024.
The reason for the rise: Russian export gateway targeted
The alleged Ukrainian attack on the vital Black Sea port of Novorossiysk, which handles a large portion of Russian and Kazakhstan's oil exports, has market participants worried.
Any disruption in operations at this strategic port threatens to reduce global crude supply, pushing prices higher.
The broader market picture: Bearish signals dominate
Despite this daily rally, the overall oil landscape remains bearish, for the following reasons:
- Recession fears: Data suggests that U.S. crude inventories rose last week, a sign of weak demand in the world's largest economy and oil consumer.
- Expected surplus: The International Energy Agency (IEA) forecasts a larger surplus in the market this year.
- Supply-demand gap: OPEC estimates that supply clearly exceeded demand in the third quarter of the year.
While the current rally appears to be an immediate reaction to a geopolitical event that threatens supplies, the market remains dominated by medium-term bearish sentiment due to slowing global demand and expectations of ample supply, putting oil prices at a crossroads between geopolitical risks and global economic realities.
