Oil Holds Near Five-Month High as Global Supply Risks Multiply

Oil prices have surged to near five-month highs, driven by escalating geopolitical tensions and supply chain disruptions. As of January 14, 2025, the global oil market is closely monitoring the ongoing conflict between Russia and Ukraine, as well as potential U.S. sanctions on Russian oil exports. These factors, combined with maintenance activities and supply chain disruptions, have contributed to the recent price increase.



The conflict in Ukraine has raised concerns about disruptions in Russian oil and gas supplies, which could tighten global oil markets and push prices higher. Additionally, the potential U.S. sanctions on Russian oil exports could further reduce global supply, driving up prices. In the IEA Oil Market Report (OMR) of August 2023, it was mentioned that the Russia-Ukraine conflict had significant implications for global oil supply, with sanctions on Russia targeting its energy sector and affecting its ability to export oil and access technology for oil exploration and production.

Supply chain disruptions and maintenance activities have also played a role in shaping oil production and pricing. In the IEA OMR of November 2023, it was reported that maintenance activities in Norway and Kazakhstan offset higher flows from other countries like Guyana and Brazil. This temporary reduction in supply can put upward pressure on oil prices. Additionally, Libya's political instability and conflict have led to frequent disruptions in its oil production and exports, affecting global supply and potentially influencing prices.

OPEC+ production cuts have also contributed to the dynamics of global oil supply and demand. In the IEA OMR of November 2023, it was mentioned that the decision by OPEC+ to delay the unwinding of its additional voluntary production cuts by another three months had materially reduced the potential supply overhang that was set to emerge next year. This decision, along with the uncertainty about when the unwinding of the cuts will actually start, has created uncertainty about future supply, which can affect market sentiment and oil prices.



In conclusion, the recent surge in oil prices to near five-month highs is driven by a combination of geopolitical tensions, supply chain disruptions, and OPEC+ production cuts. As the global oil market continues to evolve, investors and stakeholders should closely monitor these factors to anticipate potential risks and opportunities in the oil and gas industry. By staying informed about the latest developments and trends, investors can make more informed decisions and capitalize on the changing dynamics of the global oil market.