Investing.com — Oil prices settled sharply higher Monday, underpinned by output disruptions at the Johan Sverdrup oilfield in Norway and increased intense fighting between Russia and Ukraine.

By 2.30 p.m. ET (1930 GMT), the futures traded 3.2% higher to settle at $69.16 a barrel and the contract climbed 3.2% to $73.30 a barrel. 

Output disruption in Norway boost oil prices

Norway’s state-controlled Equinor said it had halted crude production at the Johan Sverdrup oil field following an onshore power outpage.

Disruptions to output at Johan Sverdrup — Europe’s highest producing oil field, is for about a quarter of all oil production in the North Sea — comes at a time many are worried about a supply surplus next year amid plans from OPEC and non-OPEC to step up output.

“Persistent worries over the clouded demand outlook in China and ample global supply outlook for next year continue to restrict any major price gains,” said analysts at ING, in a note.

The benchmark contracts slid more than 3% last week on weak data from China and after the International Energy Agency forecast global oil supply will easily exceed demand in 2025 even if cuts remain in place from a group of top producers.

EIA data has shown that US oil production remains near record levels, but the market is now executing more following the announcement that Chris Wright, CEO of Liberty Energy, would be appointed as the next Secretary of Energy.   

President-elect Donald Trump’s selection of Wright is seen as a strong signal of the incoming administration’s focus on ramping up domestic fossil fuel production. 

Ukraine to strike deep into Russia?

President Joe Biden’s administration has allowed Ukraine to use US-made weapons to strike deep into Russia, according to reports Sunday, in response to Russia’s deployment of North Korean ground troops to supplement its own forces.

This decision to let Ukraine strike deep into Russia with long-range US missiles escalates the conflict in Ukraine and could lead to World War Three, senior Russian lawmakers said on Sunday.

There has been little impact on Russian oil exports from the war so far, but if Ukraine were to target more oil infrastructure that could see oil markets add more of a geopolitical bid.

Latest positioning data

The latest positioning data showed that a fair amount of speculative selling in the benchmark contracts over the last week, noted ING. 

“Speculators reduced 22,606 lots to the net long position, leaving them with a net long position of 103,539 lots as of last Tuesday. Money managers added gross shorts by 26,702 lots to 115,849 lots, the largest weekly increase since the September start,” said ING.

“Similarly, for NYMEX WTI, speculators decreased their net long by 18,043 lots over the week to 125,942 lots for the week ending on Nov. 12.” 

By Laila Kearney, Paul Carsten and Robert Harvey

NEW YORK (Reuters) -Oil prices climbed more than $2 a barrel on Monday after news that crude production at Norway’s Johan Sverdrup oilfield had been halted, which added to earlier gains stemming from escalation of the Russia-Ukraine war.

futures settled at $73.30 a barrel, gaining $2.26, or 3.2%. U.S. West Texas Intermediate crude futures settled at $69.16 a barrel, rising $2.14, or 3.2%.

Equinor said it had halted output from its Johan Sverdrup oilfield, western Europe’s largest, due to an onshore power outage. Work to restart production was under way, an Equinor spokesperson said, but it was not immediately clear when it would resume.

Oil prices extended their gains on the outage news, which indicated a possible tightening of the North Sea crude market, UBS analyst Giovanni Staunovo told Reuters. Physical supply of from the North Sea underpins the Brent futures complex. 

Kazakhstan’s biggest oil field Tengiz, operated by U.S. major Chevron (NYSE:), has reduced oil output by 28%-30% due to ongoing repairs, helping to further tighten global supplies. Repairs were expected to be complete by Saturday, the country’s energy ministry said.

Prices also climbed as Russia’s war in Ukraine escalated over the weekend.

In a significant reversal of Washington’s policy, President Joe Biden’s administration allowed Ukraine to use U.S.-made weapons to strike deep into Russia, two U.S. officials and a source familiar with the decision said on Sunday.

The Kremlin said on Monday that Russia would respond to what it called a reckless decision by Biden’s administration, having previously warned that such a decision would raise the risk of a confrontation with the U.S.-led NATO alliance.

“Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil, as it is an escalation of tensions there in response to North Korean troops entering the fray,” IG markets analyst Tony Sycamore said.

There has been little impact on Russian oil exports so far, however oil prices could rise further if Ukraine targets more oil infrastructure, said Saul Kavonic, an energy analyst at MST Marquee.

Russia unleashed its largest airstrike on Ukraine in almost three months on Sunday, causing severe damage to the country’s power system.

Brent and WTI fell more than 3% last week due to weak data on China’s refinery run rates, and after the International Energy Agency forecast that global oil supply would exceed demand by more than 1 million barrels per day in 2025, even if output cuts remain in place from OPEC+. 

Traders began shifting WTI trades to the January contract ahead of the expiration of the December contract on Wednesday. The spread between the two contracts flipped for the first time since February into a contango structure, where the later contract traded higher than the front-month contract, meaning traders expected price to rise.

“The expiration is going to a wild one,” said Bob Yawger, director of energy futures at Mizuho (NYSE:).

Investing.com — UBS analysts highlighted palladium as the worst-performing precious metal, reflecting a 12% decline so far this year.

The bank said in a note Tuesday that they attribute the underperformance to heightened volatility and a challenging demand outlook.

Recent speculation about potential G7 sanctions on Russian palladium exports caused a temporary price spike of nearly $200 per ounce, reaching $1,248 on October 29.

However, the bank notes that with no sanctions implemented and a stronger U.S. dollar, palladium prices have since fallen below $1,000 per ounce.

UBS points out that Russia accounts for over 40% of global palladium mine supply. While a ban on Russian exports could lead to shortages in Western markets, the analysts remain skeptical that the G7 will enact such measures.

They explain that Russian palladium has already been redirected to Eastern markets, diminishing the immediate impact of such sanctions.

Despite near-term supply tightness, UBS holds a neutral 12-month outlook for palladium. The analysts warn that only high-risk investors should consider trading the metal due to its low trading volumes and limited market size.

“While we hold a neutral outlook for palladium over the next 12 months, the long-term outlook for palladium remains negative, in our view, as the metal is projected to be oversupplied,” said UBS.

Longer term, they believe palladium faces significant headwinds as the auto industry shifts away from internal combustion engines, which rely on palladium-based autocatalysts, toward battery electric vehicles. This structural decline in demand is expected to lead to oversupply in the coming years.

UBS acknowledges some temporary supportive factors, such as stalled electrification rates in the global vehicle market. Many consumers are opting for hybrid vehicles, which still require palladium and other platinum group metals.

Nevertheless, the bank remains “constructive” on other precious metals but views palladium’s outlook as fundamentally weaker, with risks skewed to the downside over the longer term.