On Friday (November 22), US crude oil prices continued their upward trend during the Asian trading session, currently trading around $70.40 per barrel. Despite the rising US dollar index and increased EIA inventory data putting some pressure on oil prices, the tight supply expectations due to the escalation of the Russia-Ukraine conflict have become the dominant factor in the market, providing strong support for oil prices.
Russian President Putin announced on Thursday that Russia had used hypersonic intermediate-range ballistic missiles to strike a Ukrainian military facility and warned Western countries that Moscow might target any military facilities of countries providing weapons for attacks on Russia. Putin noted that allowing Ukraine to use long-range missiles against Russia by Western nations is gradually turning the Russia-Ukraine conflict into a global confrontation.
Putin revealed that the strike was in response to the US and UK providing long-range weapons. On November 21, Russian forces carried out joint strikes on Ukrainian military-industrial facilities and tested the latest intermediate-range missile systems and other weapons in combat conditions, including non-nuclear hypersonic ballistic missiles. This move escalated market concerns about supply disruptions, as Russia is the world's second-largest crude oil exporter, and any significant supply disturbance could impact the global oil supply-demand balance.
Supply constraints overshadow other bearish factors
Although the US Energy Information Administration (EIA) weekly crude oil inventory data showed an increase in inventories and the rising US dollar index exerted some pressure on oil prices, concerns over supply constraints clearly dominate. The escalation in geopolitical tensions is interpreted by the market as a potential major supply risk, and this sentiment continues to drive oil prices higher.
Analysts point out that the market's focus has shifted from macroeconomic factors to geopolitical conflicts. The possibility of an escalation in the Ukraine war has had a significant impact on supply-side pressure, providing support for bulls in the short term. In addition, even though a stronger dollar typically suppresses oil prices, supply concerns have partially offset this effect.
Bulls may launch a new offensive
From a technical standpoint, once oil prices stabilize at the $70 per barrel mark, there could be further upward potential. Investors should closely monitor further developments in the Russia-Ukraine conflict, especially key supply-related events. If geopolitical tensions continue to worsen, the crude oil market may experience a new bullish offensive, with a higher likelihood of further short-term price increases.
As concerns over tight supply intensify, US crude oil prices are under heightened scrutiny. In the coming days, the evolution of geopolitical risks will be the main driving factor affecting oil prices.
