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First Look - Ukraine escalation brings back war risk premium in oil markets

Oil is trading higher, extending gains from yesterday
- The API estimates that US inventories rose by 4.8 MMBbls, ahead of the official EIA data release this morning
Ukraine escalation supporting geopolitical risk premium in crude prices
- The US has authorized Ukraine to use western provided weapons on Russian territory in an escalation of the conflict
- For the first time in the conflict, Ukraine has fired British provided cruise missiles at targets within Russia
- The escalation of the Russia-Ukraine war has heightened geopolitical risks in Europe, slightly lifting oil prices
- Despite this, long positions in WTI have declined significantly, with hedge funds holding only 50% of summer levels, according to CFTC data

Natural gas prices are up 11c to $3.11 (7:47 AM) for the December contract as odds for colder than normal first month of winter increase
- Both the American ensemble and the European weather models show a 10-15 day window colder than the 30-year normal
- In response to the 11.9 HDD increase over the past 24 hrs, the balance of the winter strip was up 13c to $3.12, while the Summer ’25 strip was up 8c to $3.16 (CWG)
- Meanwhile, the Henry Hub cash price remains at $2.30 Wednesday morning (ICE)
Permian spot prices edged above $0/MMbtu over the past few days
- Due to heavy Permian maintenance, Waha has traded negative for 32 of the last 42 days in the cash market
- Kinder’s Permian Highway Pipeline (PHP) work is scheduled to be completed today, but PHP receipts from interstate meters in west Texas are still lower (Criterion)
- About 1.2 bcf/d of visible flows were measured coming off the Matterhorn Pipeline on Tuesday, down from the +1.4 Bcf/d observed earlier this month