This week has seen a battle between bullish and bearish forces, kicking off with a focus on poor Chinese oil demand as China’s refinery run rates fell for the seventh month in a row, down 4.6% y/y. Moreover, China’s VAT rebate reduction stoked fears of lower clean oil product exports for 2025. This initial bearish momentum was compounded by waning geopolitical risk in the Middle East, with Hezbollah agreeing to a US proposal for a ceasefire and ongoing Israeli strikes on Lebanon now firmly priced in. However, we quickly saw the narrative shift; production output at Norway’s largest oilfield Johan Sverdrup was at two-thirds of its total 755kb/d capacity due to an onshore power outage on 18 Nov. While Equinor, Johan Sverdrup’s operator, reported a full restoration of output on 20 Nov, bullish sentiment was sustained by escalating tensions between Russia and Ukraine, as Ukraine carried out its first long-range attacks on Russian territory using US-supplied ATACMS and UK-provided Storm Shadow missiles. This marks a significant shift, with the Biden administration demonstrating renewed support for Ukraine, in contrast with its earlier refusal to supply the ATACMS system in the first two years of the war. While Ukraine has been instructed not to target Russian oil infrastructure, this bearish pressure was offset by Russia’s retaliatory ICBM strike into Ukraine on 21 Nov. Against this backdrop, it remains uncertain whether Brent’s current uptrend will extend into next week.
