Oil prices rose on Venezuelan blockade concerns and Russia-Ukraine tensions

Oil prices settled higher on Friday, supported by concerns over potential supply disruptions from a US naval blockade of Venezuelan tankers and an escalation in the Russia-Ukraine conflict.

Brent settled up 65 cents, or 1.1%, at $60.47 per barrel, while West Texas Intermediate rose 51 cents, or 0.9%, to $56.66 per barrel.

Despite the daily gains, both benchmarks posted weekly declines of approximately 1%, following a 4% drop the previous week. The price action underscores persistent uncertainty over global supply-demand fundamentals as the market enters the final trading week of the year.

Market participants said prices were stabilising above recent lows as traders awaited clearer guidance on geopolitical developments. Attention remained focused on diplomatic efforts related to the Ukraine conflict. On Friday, European Union leaders agreed to borrow funds to extend loans worth $105 billion to Ukraine over the next two years. However, Russian President Vladimir Putin rejected any compromise on his conditions for ending the war. Tension escalated further following reports that Ukraine struck a Russian "shadow fleet" oil tanker in the Mediterranean with aerial drones for the first time.

In the Caribbean, US Secretary of State Marco Rubio said Washington was not concerned about escalating tensions with Russia over Venezuela, as the US increased its military presence. While the Trump administration seeks to block sanctioned tankers, Venezuela authorised two cargoes not subject to US sanctions to depart for China on Thursday. Analysts noted that uncertainty over the enforcement of the blockade tempered the geopolitical risk premium.

Downside pressure remained linked to a significant deterioration in refining margins. US gasoline futures recently hit a four-year low, dragging crack spreads to their weakest levels since February. However, a floor was provided by domestic supply data; the rig count in the Permian Basin fell by three this week to 246, its lowest level since August 2021, signaling a potential decline in future US output.

Written by: Farid Muzaffar