Rising Russia-Ukraine tensions help support oil prices amid supply fears

Oil prices were rising on Wednesday as tensions between Russia and Ukraine persisted, raising concerns about possible supply disruptions. 

The escalating tensions between Russia and Ukraine have kept a floor under oil prices despite weakness in demand and oversupply concerns.

On Tuesday, Ukraine attacked the Russian border region using US ATACMS missiles for the first time, Moscow said in a statement. A New York Times report had also confirmed the attack late on Tuesday. 

The current situation remained volatile in the region as further escalations could disrupt large amounts of oil from Moscow. 

Russia remains one of the top three oil exporters in the world despite tough sanctions on its exports of fuel. 

At the time of writing, the price of West Texas Intermediate crude oil was $69.66 per barrel, up 0.6%. Brent crude on the Intercontinental Exchange was $73.66 per barrel, up 0.5% from the previous close. 

Putin warns of nuclear attack

As Ukraine has been allowed to use US-made weapons against Russia, the Kremlin had warned that it would see this step as a significant escalation in tensions. 

After Ukraine’s attack on Tuesday, Russian President Vladimir Putin lowered the bar for a nuclear attack. 

Tensions continue to boil between Russia and Ukraine, while the US involvement added more uncertainty to the conflict. 

Oil prices did not react sharply to these developments on Tuesday. However, prices have risen by nearly 1% this morning. 

"We may expect (Brent) oil prices to stay supported above the $70 level for now, as market participants continue to monitor the geopolitical developments," Yeap Jun Rong, market strategist at IG told Reuters.

Iran’s decision limits rise in prices

“Eating into some of the geopolitical risks related to Russia-Ukraine were reports that Iran offered to stop increasing its stockpiles of uranium enriched up to 60%,” Warren Patterson, head of commodities strategy at ING Group, said in a report. 

The International Atomic Energy Agency has said Iran has taken the first steps to cap production. 

Patterson added:

Also, dampening some of the enthusiasm among bulls was the restart of oil production in the North Sea. 

Norway’s Johan Sverdrup oilfield has resumed operations after a power outage knocked off oil production on Monday. 

The field produces around 755,000 barrels per day of oil but will take some time to return to full capacity, according to ING Group.

API reports crude oil build in the US

Meanwhile, adding to more bearish news for oil traders was a private report from the American Petroleum Institute (API). 

The private agency in the US reported that crude oil inventories rose by 4.8 million barrels in the week ended November 15. Analysts had expected stockpiles to fall last week. 

However, gasoline stockpiles fell by 2.5 million barrels and distillate stocks showed a decrease of 700,000 barrels, according to ING. 

The widely anticipated official weekly crude oil inventory data in the US will be released later today by the Energy Information Administration.