(Bloomberg) -- Oil edged higher after swinging between gains and losses as Russia’s war against Ukraine escalated while Iran agreed to stop producing uranium enriched close to the level at which it can be used in nuclear weapons.
West Texas Intermediate fluctuated throughout the day but ended 0.3% higher, settling above $69 a barrel. Rising tensions between Ukraine and Russia triggered a rally that was later muted by Iran’s agreement on nuclear fuel. Brent settled little changed above $73 a barrel.
Heating up geopolitical risk, Ukrainian forces carried out their first strike on a border region in Russia using Western-supplied missiles, and President Vladimir Putin approved an updated nuclear doctrine expanding the conditions for using atomic weapons. Meanwhile, the International Atomic Energy Agency said Iran agreed to stop producing near bomb-grade uranium, a move some traders interpreted as designed to avoid maximum-pressure sanctions.
While geopolitical developments have pushed crude up at times this year, oil is still slightly lower for 2024 amid concerns about Chinese demand and plentiful global supply. The prompt spread for WTI — the difference between the two nearest futures contracts — traded in a bearish contango structure on Monday for the first time in nine months, a sign near-term supplies may be exceeding demand.
Also keeping a lid on prices, Lebanon and the Hezbollah militia have agreed to a US proposal for a cease-fire with Israel, according to a report from Reuters on Monday that cited a top Lebanese official. A US official cautioned that negotiations were ongoing. On the supply side, Equinor ASA restored production at the Johan Sverdrup oil field in the North Sea to two-thirds of capacity after halting output the previous day.
The International Energy Agency has forecast a potential surplus of more than 1 million barrels a day next year as Chinese demand continues to falter, which could be even bigger if OPEC+ decides to revive output. HSBC expects the cartel to delay a potential production hike until April 2025 at its Dec. 1 meeting, analysts led by Kim Fustier said in a note.
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