Oil Markets Edge Up as Ukraine Strikes Raise Supply Fears
Oil prices inched higher after Ukrainian strikes on Russian energy sites and fading hopes for a peace breakthrough raised concerns about future crude supplies.
A Rising Tension Lift for Oil Markets
Global oil prices rose slightly on Thursday as geopolitical tensions once again reverberated through energy markets. A new wave of Ukrainian attacks targeting Russia’s oil infrastructure revived concerns about future supply, while signs of stalled peace efforts dampened hopes for any near-term resolution that might ease market uncertainty.
A Market Already on Unsteady Ground
Crude oil has been moving within a narrow band for weeks, pressured largely by sluggish demand and persistent worries about an oversupplied global market. Traders have been watching developments in Eastern Europe closely, aware that the conflict and the diplomatic efforts surrounding it continue to exert outsized influence on pricing.
On Thursday, Brent crude ticked up by 14 cents to trade at $62.81 in early Asian hours, while U.S. West Texas Intermediate added 16 cents, reaching $59.11. Though the movement was modest, it reflected a cautious pivot among traders responding to the latest headlines out of the region.
Ukraine Targets Key Russian Pipeline
According to a Ukrainian military intelligence source, Kyiv forces struck the Druzhba oil pipeline in Russia’s Tambov region on Wednesday. This marked the fifth recorded attack on the massive Soviet-era pipeline that supplies Russian crude to Hungary and Slovakia, both key European customers still reliant on its flow.
Despite the strike, the pipeline’s operator and Hungarian energy firm MOL reported that deliveries continued without interruption. Still, the symbolic and strategic significance of repeated attacks on such infrastructure fueled speculation about what future disruptions could look like if the conflict escalates.
At the same time, diplomatic movement appeared to stall. Representatives of U.S. President Donald Trump left their latest round of talks with Kremlin officials offering no tangible progress toward ending the war. Trump later acknowledged that the next steps in the peace process were uncertain, an admission that strengthened the perception that a negotiated breakthrough remains distant.
For traders, this marks a stark reversal from the sentiment seen earlier this month, when optimism over peace prospects pushed prices lower. Markets had assumed that any ceasefire deal might pave the way for lifting sanctions on Russian oil, reopening the tap in an already saturated global market. Those expectations faded quickly this week.
Oversupply Still Weighing Down Prices
Even with geopolitical tensions injecting some upward pressure, analysts say the fundamental picture remains weak. IG market analyst Tony Sycamore noted that crude oil remains burdened by sluggish demand and a supply glut that has yet to ease meaningfully.
“Despite the slight rebound, the market is still wrestling with concerns about excess supply and softer consumption,” Sycamore wrote in a client briefing, emphasizing that rising inventories continue to constrain any sustained price recovery.
Reinforcing that sentiment, Fitch Ratings revised its oil price assumptions for 2025 through 2027, lowering expectations to reflect what it described as structural oversupply. The agency projected that production growth, particularly from non-OPEC countries, is likely to exceed demand through the medium term.
A Market Caught Between Tension and Surplus
The latest pipeline strike and diplomatic setbacks add new volatility to a market already dealing with contradictory forces. On one hand, Ukraine’s attacks highlight the lingering vulnerabilities of Russia’s energy infrastructure and the potential for unplanned disruptions, a risk premium that traders typically price in.
On the other hand, global consumption remains underwhelming and inventories remain elevated, limiting the extent to which geopolitical shocks can lift prices. If peace talks fail to advance, sanctions stay in place, and output remains high, oil markets could remain stuck in a tug-of-war between supply risks and surplus realities.
Medium-term forecasts also suggest that production in the U.S. and other non-OPEC regions could continue to expand, further dampening the chance of any major price rally unless OPEC+ coordinates deeper cuts, an option the group appears hesitant to pursue given domestic revenue pressures among member states.
A Fragile Equilibrium
Thursday’s slight uptick in prices underscores how sensitive the oil market remains to geopolitical developments, even as structural issues exert downward pressure. With the Ukraine conflict showing no clear path toward resolution and global demand failing to accelerate, crude prices are likely to continue hovering in a narrow and unpredictable range.
Until either diplomatic progress or a decisive shift in supply and demand dynamics emerges, traders should expect more volatility and fewer certainties in the weeks ahead.