(RTTNews) – Crude oil surged on Monday as the conflict between the US and Venezuela escalated to the next level. In Europe, Russia and Ukraine continued heavy attacks and despite American mediation there was no end to the war in sight.
WTI crude oil for February delivery was last seen trading up $1.43 (or 2.53%) at $57.95 a barrel.
On the geopolitical front, after US President Donald Trump ordered a “naval blockade” on all oil tankers entering and exiting Venezuela on December 16, the US seized two ships, escalating tensions.
The Trump administration has designated Venezuelan President Nicolas Maduro as an accomplice of foreign terrorists and accused Maduro of promoting narco-trafficking that has led to the opioid crisis in the US.
Meanwhile, China condemned the US steps, saying they were a violation of international law. Of note, most crude oil from Venezuela is shipped to China via “shadow-fleet tankers”.
The US is now reportedly moving to stop and seize another oil tanker in international waters near Venezuela (marking the third seizure), which the US has alleged is part of a “dark fleet”.
Oil prices rose today due to US pressure on Venezuela.
In Europe, over the weekend, a Ukrainian drone destroyed two ships and two piers in Russia’s Krasnodar region on the Black Sea coast.
Separately, a weekend meeting in Miami, Florida between US envoy Steve Witkoff and Ukrainian official Rustam Umerov ended with no news of a breakthrough on a ceasefire.
However, the two issued a joint statement calling the talks “productive and constructive” without giving further details on the progress.
Witkoff later also announced that the US had “meaningful” talks with Russian envoy Kirill Dmitriev.
Russia is losing billions of petrodollars in revenue due to sanctions imposed by the US and the West on its oil exports. Earlier proposals to end the war floated by the Trump administration failed to yield significant results as Russia and Ukraine disagreed over territorial concessions.
Last Friday, Baker Hughes’ count for U.S. crude oil rigs showed that the number in the week ended Dec. 19 decreased to 406 from 414 the previous week and the total rigs count in the week ended Dec. 19 decreased to 542 from 548 the previous week.
In its revised Short-Term Energy Outlook, the US Energy Information Administration estimates that the OPEC alliance’s effective production capacity was about 220,000 barrels per day higher in 2024, 370,000 bpd in 2025 and 310,000 bpd in 2026 than its earlier assessment.
This revision stems from a change in the EIA’s strategy for assessing supply risk, i.e., from “maximum sustainable capacity” to “effective production capacity”.
Today, the Federal Reserve Bank of Chicago released the Chicago Fed National Activity Index, which increased from -0.31 in August to -0.21 in September, indicating a mild contraction in economic activity. Despite the gains, the index is in negative territory for the sixth consecutive month.
In the US, Cleveland Fed President Beth Hammack has advocated that interest rates should remain unchanged as inflation risks outweigh labor market concerns.
In a Bloomberg TV interview, Fed Governor Stephen Miron warned that the US could risk entering a recession if the Fed did not lower interest rates, although he denied any potential near-term threat.
Despite divergent views from Fed governors and Fed Chairman Jerome Powell’s cautious note to traders that they should not consider further rate cuts certain, investors are still expecting some more rate cuts in the upcoming new year.
The US Dollar Index was last seen trading down 0.27 (or 0.27%) today at 98.32.
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