Oil prices soared on Wednesday as geopolitical premiums returned to the market amid heightened tensions between Russia and Ukraine. The rise in prices comes despite bearish data from the US Energy Information Administration, which showed oil stockpiles in the country rose last week. Tensions remained high between Russia and Ukraine as the latter have now carried out two strikes against the Kremlin on Tuesday and Wednesday. At the time of writing, the price of West Texas Intermediate crude on the New York Mercantile Exchange was $69.78 per barrel, up 1.5%. Brent crude on the Intercontinental Exchange was at $73.83 per barrel, up 1.4% from the previous close. Oil traders were also eagerly waiting for a ministerial meeting of the Organization of the Petroleum Exporting Countries and allies on December 1.OPEC+ is scheduled to decide on its oil production policy. The cartel had recently extended its voluntary production cuts of 2.2 million barrels per day by a month till the end of December.
Ukraine and Russia trade blows
Over the weekend, Russia launched its biggest attack in almost three months on Ukraine, crippling the country’s power grid. This prompted Ukraine to retaliate by carrying out strikes in the Russian border region on Tuesday, using US ATACMS missiles.Washington had earlier allowed Ukraine to use US-made weapons to strike deep into Russian territory. The move was met with displeasure by Russia as the Kremlin warned that it would be a significant escalation of the conflict. Additionally, Ukraine had hit Russia again on Wednesday, using British cruise missiles, to which Moscow had responded back by launching intercontinental ballistic missiles early Thursday. This is the first time Russia has used such powerful long-range missiles during the war, which began more than a couple of years ago. “For oil, the risk is if Ukraine targets Russian energy infrastructure, while the other risk is uncertainty over how Russia responds to these attacks,” ING Group’s analysts said in a note. 
Source: ANZ ResearchAccording to ANZ Research, the recent rise in tensions had raised the volatility index in Brent oil prices to 35% in October.“Money managers are trimming net-long positions in Brent and WTI,” ANZ Research said.
Rise in US stockpiles limit gains
The EIA reported late on Wednesday that crude oil stockpiles in the US rose by 500,000 barrels in the week ended November 15. The bearish data had weighed on sentiments on Wednesday, and prices had fallen initially. The energy agency also said that gasoline inventories also rose by more than 2 million barrels last week. ING analysts added:
The gasoline build came about despite refiners reducing utilisation rates by 1.2pp over the week. Lower refinery activity was more than offset by weaker implied demand.
US’ production of crude oil remained near record levels last week at over 13 million barrels per day.The country is the biggest producer of crude oil in the world.“However, as mentioned earlier in the week, Iran’s pledge to stop stockpiling uranium does counter some of the geopolitical risk, with it potentially reducing some of the supply risks related to Iran ahead of President-elect Trump entering office,” ING Group said.
Will OPEC+ extend cuts again?
As the ministerial meeting of the OPEC+ is near, the market has been speculating whether the cartel would go ahead with a planned increase in output from January 1. Analysts at Fxempire said that OPEC+ may once again delay its production increase, thereby halting its unwinding of production cuts in January. James Hyerczyk, analyst at Fxempire, said in a report:
The group is set to meet on Dec. 1 to discuss output strategies, and any decision to maintain current production cuts could lend support to prices.
As demand has been poor over the past few months, especially from China, OPEC’s decision is likely to play a crucial role in shaping the balance in the market in 2025. More By This Author:Solana Price Rally: Can Bulls Push SOL Past $350 After Crossing $241?
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