Morning Highlights: Ukrainian Pipeline Strikes and Stalled Diplomacy Support Crude

Thursday, December 4, 2025 | 6:00AM EST

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Oil edged higher on supply disruption concerns despite weak fundamentals. Brent crude rose $0.39 (0.65%) to $63.06/bbl, while WTI gained $0.45 (0.76%) to $59.40/bbl.

Key Driver: Ukraine's intensifying attacks on Russian oil infrastructure combined with no diplomatic breakthrough kept supply concerns alive, though broad oversupply kept gains modest.

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TOP DEVELOPMENTS

1. Ukraine Escalates Infrastructure Campaign

Ukraine struck the Druzhba oil pipeline in Russia's Tambov region Wednesday—the fifth attack on the critical artery supplying Hungary and Slovakia. While operators reported normal flows, the strike signals an evolving strategy.

Kpler analysis shows the drone campaign has entered "a more sustained and strategically coordinated phase," with repeated strikes preventing facilities from stabilizing. The impact: Russian refining throughput dropped to ~5 million bpd between September-November, down 335,000 bpd year-over-year. Gasoline production took the hardest hit, with gasoil output also materially weaker.

Sustained pressure on Russian refining capacity is creating tangible supply constraints, even as the global market remains oversupplied.

2. Peace Talks Remain Gridlocked

Trump's envoys left Moscow this week without breakthroughs. Trump himself said "it was unclear what happens now," dampening earlier optimism that a quick deal would lift Russian sanctions and flood markets with additional barrels.

"Crude will likely remain stuck in a narrow range while the Ukraine peace efforts grind on," noted Vanda Insights founder Vandana Hari.

Markets had priced in potential sanctions relief—that scenario is now on hold, removing near-term bearish pressure.

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CORPORATE & CAPACITY MOVES

Exxon to Shutter Singapore Cracker

ExxonMobil plans to permanently close one of two steam crackers at its massive Jurong complex (592,000 bpd refinery) by June 2026, Reuters reported citing sources. The facility has 1.9 million tonnes/year ethylene capacity.

The move reflects broader industry rationalization amid brutal petrochemical margins driven by China's massive overcapacity. Exxon declined to comment on "market rumors."

Fitch Slashes Oil Price Forecasts

Fitch Ratings cut its 2025-2027 oil price assumptions Thursday, citing oversupply and production growth expected to outpace demand—a reminder that fundamental headwinds remain firmly in place.

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GAS MARKET: TURKEY EXTENDS GAZPROM, EYES U.S. LNG

Turkey extended two Gazprom contracts for one year (22 bcm through end-2026), though Russian gas now represents under 40% of consumption—down from previous levels as Ankara diversifies.

Strategic Shift: Turkey is considering upstream investments in U.S. LNG facilities to hedge its 15-year commitment to purchase 1,500 U.S. LNG cargoes. Energy Minister Bayraktar confirmed talks with Chevron and other producers. The U.S. is now Turkey's fourth-largest supplier (5.5 bcm this year, 14% market share).

Turkey plans two additional floating regasification units to boost its 50 bcm/year LNG import capacity, positioning itself as a regional gas hub.

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BOTTOM LINE

Geopolitical risks from Ukraine's infrastructure campaign and diplomatic deadlock are providing near-term support, but structural oversupply concerns, highlighted by Fitch's price cuts and Exxon's petrochemical rationalization continue to cap upside. Oil remains range-bound as traders weigh supply disruptions against fundamental weakness. Watch for any acceleration in Ukrainian strikes or unexpected movement in peace negotiations.