CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange moved lower in early trading Wednesday as news that Tuesday's missile landing in Poland was likely a Ukrainian air defense missile, and not an accidental or deliberate attack from Russia on a member of the North Atlantic Treaty Organization.
Brent and West Texas Intermediate futures had fallen to three-week lows at $91.53 and $84.06, respectively, on Tuesday ahead of news of the missile explosion in Przewodw, a town bordering Ukraine, before reversing higher.
Poland's Prime Minister Mateusz Morawiecki convened an emergency meeting with the country's security and defense ministers Tuesday afternoon following the explosion on its eastern border that killed two ostensibly to consider invoking NATO Article 4. Under Article 4, NATO countries consult together "whenever, in the opinion of any of them, the territorial integrity, political independence or security of any of the Parties is threatened."
If Russia had intentionally targeted Poland, Article 5 could be invoked, which would bring the full might of NATO forces to bear.
Wednesday morning, Polish President Andrzej Duda said there was no evidence suggesting the missile that hit the Polish town was an intentional attack by Russia, according to Reuters. The missile was likely an old Soviet Union rocket deployed by Ukrainian anti-air defense said the Polish president. On Tuesday, Russia had launched numerous missiles at Ukrainian cities in one of the largest barrages of missile attacks since the Feb. 24 invasion of Ukraine by President Vladimir Putin.
The incident highlighted the elevated geopolitical risk for the oil market heading into early December when sanctions on Russian crude oil by the European Union take effect. G7 members are still working out final details for a price cap mechanism that allows Russian crude oil to be bought without incurring sanctions ahead of a Dec. 5 effective date.
News of the missile explosion initially overwhelmed a bearish demand forecast by the International Energy Agency released Tuesday morning, with the Paris-based agency citing a persistently weak Chinese economy, a deepening energy crisis in Europe, and global economic headwinds from a strong U.S. dollar in slowing oil demand.
Shortly after 8 a.m. EST, NYMEX December WTI futures were down $0.70 at $86.22 barrel (bbl), and January Brent futures on ICE was $0.46 lower about $93.40 bbl. December RBOB futures on NYMEX was down a little more than $0.01 at $2.5050 gallon, with December ULSD futures $0.0115 higher at $3.6528 gallon.
WTI futures declined despite a weaker U.S. dollar, down 0.26% at 106.015 in index trading against a basket of foreign currencies, and bullish data from the American Petroleum Institute released Tuesday afternoon. API reported domestic commercial crude oil stocks were drawn down a steep 5.835 million bbl during the week ended Nov. 11 alongside a 4.1 million bbl discharge of crude oil from the Strategic Petroleum Reserve.
API reported a 1.690 million bbl build in gasoline stocks, and an unexpected 850,000 bbl increase in distillate stocks occurred last week.
Energy Information Administration is scheduled to issue its weekly supply report at 10:30 a.m. EST.
Brian L. Milne can be reached at firstname.lastname@example.org