Oil Prices Rise Amid U.S. Dollar Decline and Geopolitical Tensions

Crude oil prices climbed to their highest level of the week after the U.S. Dollar Index fell to a two-week low, offering support to energy markets. The rally was strengthened by multiple supply disruptions and fresh policy shifts indicating that the global oil market may tighten significantly in the months ahead. West Texas Intermediate (WTI) began the week by rebounding toward the mid-$59 range as traders reacted to a combination of geopolitical tensions, OPEC+ decisions, and renewed pressure on Russian exports.

Russian oil supplies remained under strain after a major Black Sea export facility was shut down following Ukrainian drone and missile attacks. Russia has lost up to 1.1 million barrels per day of output after Ukraine destroyed or halted 13–20% of its refining capacity by the end of October. Data also showed Russian crude shipments falling to 1.7 million barrels per day in the first half of November, the lowest in more than three years. New U.S. and EU sanctions on Russian oil companies and infrastructure intensified the pressure on exports, reinforcing the impact of physical supply losses.

Geopolitical risks continued to rise. Discussions around potentially closing Venezuelan airspace—an issue linked to transport security and international oil flows—added to supply concerns, with restrictions potentially affecting hundreds of thousands of barrels per day mostly bound for Asian markets. Further tightening came after the Caspian Pipeline Consortium halted operations due to damage to one of its moorings. The line, which transports 1.6 million barrels per day of Kazakh crude, was forced to suspend activity, prompting Kazakhstan to explore alternative export routes.

OPEC+ added another layer of support for prices after confirming its decision to freeze all production increases during the first quarter of 2026. Despite earlier expectations of a 500,000-barrel-per-day surplus in the third quarter, the alliance reaffirmed its focus on market stability. In addition, OPEC+ approved a new framework to reassess each member’s sustainable production capacity starting in 2027, a move that could reshape future quota negotiations and fuel internal competition. The announcement came amid broader speculation that global diplomatic efforts could eventually shift the landscape of sanctions on Russia, potentially influencing future supply dynamics.

Additional market tightness emerged as crude stored on tankers for more than 7 days continued to rise—an indication that delays in the physical movement of oil are adding uncertainty about timely supply availability.

On the financial front, the U.S. Dollar Index slipped to a two-week low, ending the session down 0.05%. The yen strengthened after Bank of Japan Governor Ueda hinted at a possible rate hike during this month’s policy meeting, putting downward pressure on the dollar. Meanwhile, the U.S. ISM Manufacturing PMI for November dropped by 0.5 points to 48.2, its lowest level in four months, while the Prices Paid Index unexpectedly rose by 0.5 points to 58.5, highlighting persistent inflationary pressures.

Markets increasingly expect the Federal Reserve to cut interest rates at next week’s FOMC meeting, with futures pricing reflecting a 96% probability of a 25-basis-point reduction on December 9–10. Lower interest rates could stimulate economic activity and strengthen demand outlooks across energy-intensive sectors.

The dollar later regained some ground after the 10-year Treasury yield climbed to its highest level in a week. However, sentiment was unsettled by reports that Kevin Hassett is a leading candidate to replace Jerome Powell as Federal Reserve Chair—an appointment viewed as more dovish and potentially negative for the dollar, raising broader questions about the future independence of U.S. monetary policy.

With OPEC+ tightening its production stance, global supply interruptions intensifying, Russian exports under pressure, and expectations of U.S. monetary easing growing, traders are increasingly pricing in a more balanced—and potentially tighter—oil market. As a result, WTI remains strongly supported near recent highs as supply risks deepen and demand prospects improve.