Oil prices rose more than $1 a barrel on Monday (December 29th) as Russia accused Ukraine of attacking President Vladimir Putin's residence, while traders braced for potential supply disruptions in the Middle East due to escalating tensions in Yemen.

Brent crude futures rose $1.30, or 2.1%, to $61.94 a barrel. U.S. West Texas Intermediate crude futures rose $1.34, or 2.4%, to $58.08.

On Monday, Russia accused Ukraine of launching a drone attack on the Russian president's residence in northern Russia, prompting Moscow to now plan to review its position in peace talks. Ukraine rejected Russia's claim of the drone attack, and its foreign minister said Moscow was seeking "false justification" for further attacks on its neighbor.

"Unless Russia surprises the world by reversing its previous demands regarding territory and security guarantees, we expect oil prices to rise slightly throughout the remainder of this week and into next," said oil trading advisory firm Ritterbusch and Associates.

Before the drone attack claims, Ukrainian President Volodymyr Zelenskiy said on Monday that significant progress had been made in talks with US President Donald Trump and agreed that US and Ukrainian teams would meet next week to resolve issues aimed at ending Russia's war in Ukraine.

TENSIONS IN YEMEN RAISE SUPPLY CONCERNS

The oil market's focus has also shifted to the Middle East, Gelber & Associates said in a note. "Renewed instability, including Saudi airstrikes in Yemen, is keeping headlines about supply disruptions in the air," the energy consultancy said.

The Saudi-led coalition in Yemen said that any military movement by the main separatist group in the south, in the eastern Hadramout province, that undermines de-escalation efforts would be met with force to protect civilians, the Saudi state news agency reported on Saturday.

An escalation in fighting on Thursday killed two members of the Southern Transitional Council's elite Hadhrami forces in Hadramout, the group said in a statement. Saudi airstrikes followed early Friday, targeting STC forces in the area, a source told Reuters.

China's strong seaborne crude imports are also helping to tighten the oil market, said UBS analyst Giovanni Staunovo.

He added that $60 per barrel is the floor for Brent, with prices expected to recover slightly in 2026 as non-OPEC+ supply growth is likely to stall in mid-2026.

Energy investors awaited data on US inventories for the week ending December 19. The report, expected to be released at 10:30 a.m. ET on Monday, was postponed without a new release date.

A broader Reuters poll showed US crude inventories were expected to have fallen in the week ending December 19, while distillate and gasoline inventories were expected to have risen. (alg)

Source: Reuters.com