Oil prices climbed roughly 1% on Friday, reaching a two-week high, as heightened geopolitical tensions stemming from the escalating Russia-Ukraine war boosted the market’s risk premium. Brent crude rose 94 cents (1.3%) to settle at $75.17 per barrel, while U.S. West Texas Intermediate (WTI) crude gained $1.14 (1.6%) to close at $71.24. For the week, both benchmarks were up approximately 6%, marking their highest levels since November 7.
The surge was fueled by intensified conflict, with Russia ramping up its missile attacks following Ukraine’s strikes into Russian territory using U.S. and British missiles. Analysts expressed concern over potential accidental damage to critical oil and gas infrastructure, which could exacerbate the conflict. Adding to the pressure, the U.S. imposed new sanctions on Russia’s Gazprombank, aiming to hinder gas exports. Meanwhile, China announced measures to bolster trade and energy imports, with crude imports expected to rebound in November. India also saw increased oil imports due to rising domestic consumption. Price gains were capped by weak economic data from Europe, where business activity sharply declined, with the services and manufacturing sectors contracting.
In Germany, economic growth for the third quarter was revised lower, contributing to concerns about Europe’s economic outlook. Despite these headwinds, geopolitical risks remained a significant driver of oil prices during the week.
U.S. business activity reached its highest level since April 2022, driven by growth in the services sector. The divergence in economic performance strengthened the U.S. dollar, making oil more expensive for buyers using other currencies, which dampened demand.