Oil Markets Surge as Dollar Weakness Converges with Russian Supply Uncertainties

Energy futures demonstrated notable strength today, with January WTI crude oil climbing +0.62 (+1.06%) and January RBOB gasoline advancing +0.0316 (+1.73%) to touch 1-week highs. The catalyst for this upward momentum stems from multiple sources: a weakening dollar index (DXY00) that touched a 1.5-week low provides fundamental support for commodity valuations, while persistent concerns around the Russian-Ukrainian conflict continue to underpin prices.

Geopolitical Tensions Sustain Price Floor

The outlook for Russian-Ukrainian hostilities remains murky following ambiguous statements from Russian President Putin regarding US President Trump’s peace initiative. European Commission Vice President Kallas emphasized on Wednesday that “we see no indication from Russia that they want peace,” suggesting prolonged uncertainty in the region. This geopolitical backdrop effectively props up energy prices, as market participants factor in supply chain disruptions and the potential for further escalation affecting crude distribution.

Adding to supply-side pressures, Ukraine’s sustained campaign against Russian energy infrastructure has inflicted substantial damage. Over the past quarter, Ukrainian forces have targeted at least 28 Russian refineries, obliterating between 13% to 20% of the nation’s refining capacity by late October—a reduction translating to approximately 1.1 million bpd of lost production. Vortexa data from last Wednesday revealed that Russian oil product shipments plummeted to 1.7 million bpd during the first half of November, the most severe contraction seen in over 36 months. New sanctions imposed by the United States and European Union on Russian petroleum companies, facilities, and vessel infrastructure have compounded export limitations and created additional structural headwinds for crude flowing from Russia into global markets.

Domestic Production Signals Constraint

The domestic production landscape also reinforces the bullish case for crude. Baker Hughes’ latest assessment showed active US oil rigs contracting by 12 units to reach 407—marking a 4-year nadir. This sharp decline, representing a substantial pullback from the 627-rig peak recorded in December 2022, telegraphs constrained near-term output expansion. US crude production for the week ending November 21 ticked down -0.1% week-over-week to 13.814 million bpd, retreating from the recent peak of 13.862 million bpd registered in early November.

Carryover support also materialized from Wednesday’s EIA inventory report, which documented that crude stockpiles stood 3.8% beneath seasonal 5-year norms, gasoline reserves ran 3.3% lean versus historical averages, and distillate supplies registered 6.9% below seasonal benchmarks.

OPEC+ Maintains Measured Approach Amid Global Surplus Concerns

OPEC+ is preparing for its virtual convening this Sunday, with consensus expectations that the coalition will defer additional output expansion scheduled for the first quarter of 2026. The organization previously announced a +137,000 bpd production increment for December followed by a production pause, as emerging evidence of global crude surfeit prompts caution. OPEC’s October output expanded by +50,000 bpd to 29.07 million bpd, reaching the highest level in 2.5 years, yet the group still retains another 1.2 million bpd of planned restoration from the 2.2 million bpd reduction initiated in early 2024.

Data-driven forecasts from official agencies signal supply overabundance: the EIA elevated its 2025 US crude production projection to 13.59 million bpd, while earlier this month OPEC recalibrated its Q3 global market estimates, shifting from an anticipated deficit to a 500,000 bpd surplus as American production outpaced projections. Looking ahead, the IEA projected a record 4.0 million bpd global surplus for 2026, underscoring mounting supply pressures that may weigh on prices in the medium term.

Additional Market Considerations

Geopolitical risk dimensions extend beyond the Russia-Ukraine theater. The prospect of US military involvement targeting Venezuela—the world’s 12th-largest petroleum producer—injects additional volatility into crude projections. Meanwhile, Vortexa’s Monday tracking indicated that crude stored aboard stationary tankers (idle for 7+ days) expanded +9.7% week-over-week to 114.31 million barrels as of November 21, representing the highest accumulation observed in 2.25 years—a metric suggesting underlying price weakness pressures and growing inventory concerns among market participants.