Crude Rises on Dollar Weakness and Geopolitical Risks

January WTI crude oil (CLF26) today is up +0.76 (+1.30%), and January RBOB gasoline (RBF26) is up +0.00054 (+0.30%).

Crude oil and gasoline prices are moving higher today due to the decline in the dollar index (DXY00) to a 5-week low.  Also, US-Russian talks failed to reach a breakthrough in ending the war in Ukraine, meaning restrictions will stay in place on Russian energy exports.  Gains in crude are limited due to a bearish weekly EIA inventory report that showed an unexpected increase in crude stockpiles and a larger-than-expected build in gasoline and distillate supplies.

Geopolitical risks are supporting crude prices.  On Tuesday, Interfax reported that Russian President Putin threatened to attack ships from nations helping Ukraine if attacks on Russian vessels don’t stop.   Over the past week, four Russian tankers have been attacked by drones in the Black Sea.  Also,  President Trump said airspace over Venezuela should be considered closed and that the US may soon start targeting drug cartels within Venezuela.   Venezuela is the world’s 12th-largest oil producer.

Reduced crude exports from Russia are underpinning crude prices.  On November 19, Vortexa data showed Russia’s oil product shipments fell to 1.7 million bpd in the first 15 days of November, the lowest in more than 3 years.  Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia’s crude export capabilities.    Ukrainian drone and missile attacks over the weekend damaged a Russian Baltic Sea oil terminal, forcing it to close.  The Caspian Pipeline Consortium, which carries 1.6 million bpd of Kazakhstan’s crude exports, was forced to close after a pipeline was damaged at one of its moorings.  New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.

Crude also garnered support after OPEC+ on Sunday said it will stick with plans to pause production increases during Q1 of 2026.  OPEC+ at its November 2 meeting announced that members will raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus.  The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026.  OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore.  OPEC’s October crude production rose by +50,000 bpd to 29.07 million bpd, the highest in 2.5 years.