Domestic crude output stalled last week at a level below the 2022 peak – and far lower than the pre-pandemic high – while the Kremlin’s erratic dictator threatened nuclear weapon retaliation amid the war in Ukraine. Russian President Vladimir Putin amplified already elevated uncertainty about his country’s fragile role on the world’s energy stage.

Brent crude prices hovered in a narrow range following Wednesday’s developments. The international benchmark held around $90/bbl in morning trading, essentially even with the prior day’s close but ahead about 15% from the start of 2022.

After climbing earlier in the summer, U.S. production flattened for the past four weeks at 12.1 million b/d, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report. That kept output below the 2022 high of 12.2 million b/d and about 1 million b/d lower than the pre-pandemic pinnacle reached in early 2020.

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

Exploration and production (E&P) companies have boosted output from well below 12.0 million b/d in the pandemic’s immediate aftermath in 2021 and early this year. But E&Ps have done so cautiously amid political pressure to invest more in renewables and bouts of oil demand uncertainty.

Demand in September has tapered notably in the United States. Consumption of total petroleum products for the week ended Sept. 16 fell 2% from the prior week to 18.9 million b/d, according to EIA. Demand for the Sept. 9 period was down 3% week/week.

Global consumption also pulled back in recent weeks, according to OPEC estimates. This was partly due to coronavirus-related government lockdowns in China, a major oil consumer, and partly due to inflation-induced economic stress in Europe.

Still, OPEC has forecasted world oil demand will rise by 3.1 million b/d this year and another 2.7 million b/d in 2023 to 102.7 million b/d, eclipsing pre-pandemic levels. Steady or even increased production among OPEC’s members and their allies led by Russia, along with the United States, may be needed to balance supply with demand, cartel researchers said.

Nuclear Threat

Putin, who leads the world’s third-largest oil producing country, threw a heap of uncertainty onto the supply outlook with thinly veiled threats of a nuclear attack that could throw the global order out of whack.

In a televised address Wednesday that was translated for the Associated Press (AP), Putin said he would mobilize hundreds of thousands more soldiers to fight in Ukraine, ramping up resources in an effort to win back momentum in a nearly seven-month slog of a war that has no clear end in sight. Putin, whose Kremlin-controlled economy was shaken by myriad Western sanctions, threatened the might of Russia’s nuclear arsenal should the North Atlantic Treaty Organization (NATO) interfere in the war.

Putin accused the West of “nuclear blackmail” and noted, without evidence, “statements of some high-ranking representatives of the leading NATO states” about the possibility of using nuclear weapons against Russia, according to the AP.

“To those who allow themselves such statements regarding Russia, I want to remind you that our country also has various means of destruction … and when the territorial integrity of our country is threatened, to protect Russia and our people, we will certainly use all the means at our disposal,” Putin said. He added: “It’s not a bluff.”

Putin, as he has since the war launched in February, left analysts and markets dubious about the long-term impacts on both supplies of oil and natural gas.

“Russia’s invasion of Ukraine has thrown global energy markets into turmoil not seen since the 1970s,” BMO Capital Markets analyst Randy Ollenberger said.

“Prior to the invasion, Russia was one of the largest exporters of crude oil and natural gas in the world,” he added. “Russia had been steadily reducing exports of natural gas to Europe over the last 12 months and has now threatened to cut them off completely. It has also indicated that it could reduce sales of crude oil and petroleum products to countries that attempt to impose the proposed price cap. The simple fact is that the world cannot easily make up for the loss of Russian exports.”

Meanwhile, EIA said U.S. commercial crude inventories last week, excluding those in the Strategic Petroleum Reserve, increased by 1.1 million bbl from the previous week. At 430.8 million bbl, stocks are about 2% below the five-year average.