Analysis of the Impact of the Russia-Ukraine Situation and U.S. Oil Inventories on the Energy Market and Investments

I have obtained the latest data and revised previous statements, and based on the available information, I have conducted a systematic, layered analysis of the impact of the Russia-Ukraine situation and U.S. oil inventory data (avoiding conclusions beyond factual evidence from tools).

• Scope of Attacks: In the second half of 2025, Ukraine intensified attacks on Russian refineries, oil fields, storage and transportation facilities, and export terminals, significantly impacting Russia’s refining capacity [1][2][7].
• Quantitative Impact: The Security Service of Ukraine stated that as of December 2025, approximately 37% of Russia’s refining capacity was shut down, corresponding to a loss of over 2 million barrels per day of refining capacity [1]. In August alone, Reuters reported that about 1.1 million barrels per day of refining capacity was temporarily shut down, involving 10 major refineries [1].
• Repair Difficulty: Key equipment (e.g., AVT-6) at some refineries was destroyed; procurement of precision equipment and reinstallation are complex under sanctions, with repair cycles possibly ranging from months to years [1].
• Significance for Russia’s Economy: Oil and gas account for approximately 70% of Russia’s fiscal revenue; the ongoing “energy war” will amplify its fiscal and export revenue pressures [1][2].

• Event Disruptions: In late December, Russia claimed Ukraine used drones to attack Putin’s residence and said it would re-examine its negotiation stance, which Ukraine denied [2]. Earlier, Zelenskyy stated progress had been made with the U.S. on a peace agreement, but obvious obstacles remain to peace talks [2][3].
• Market Reactions: When optimism about peace prospects rises, oil prices come under pressure; when events escalate, the supply risk premium rises, enhancing oil prices’ rebound momentum [2][3].
  -叠加 of Other Risk Premiums: The Middle East situation (Saudi military operations against Yemen, Iran’s statements) and U.S.-Venezuela relations also form supplementary sources of supply disruption risks [2][3].

• Short-Term: Russian refining capacity damage, increased export uncertainty, combined with Middle East and U.S.-Venezuela risks, supply premiums provide bullish support for oil prices [2][3].
• Medium-to-Long-Term: Slow structural capacity repair and sanctions constraints may reduce Russia’s supply elasticity; if geopolitical easing falls short of expectations, oil prices are prone to rise rather than fall.
• Futures Verification: WTI and Brent crude oil rebounded significantly at the end of December (single-day gain of over 2%), reflecting the market’s immediate repricing of supply risks [2][3].

• Crude Oil: +2.39 million barrels [5]
• Gasoline: +1.09 million barrels
• Distillates: +680,000 barrels [5]
• Interpretation: API data indicates simultaneous inventory builds in crude oil and refined products, sending a suppressing signal to oil prices.

• Commercial Crude Inventories: -1.274 million barrels [5]
• Gasoline Inventories: +4.808 million barrels [5]
• Distillate Inventories: +1.712 million barrels [5]
• Cushing Inventories: -742,000 barrels [5]
• Operating Rate: Rose to approximately 94.8% [5]; refinery activity increased but refined product demand failed to match.
• Multi-Cycle Comparison: Crude inventories are about 4% lower than the five-year average, and gasoline and distillate inventories are also below the five-year average [5].
• Data Release Delay: Affected by the Christmas holiday, EIA delayed the release of the week’s data to the evening of December 29 Beijing time [5]; the market has expected games before the latest EIA confirmation.

• API as a Leading Indicator: There are differences in samples and statistical calibers between API and EIA, leading to occasional short-term divergences.
• Historical Pattern: When API shows inventory builds and EIA shows inventory draws, the market is often initially suppressed by API sentiment and then returns to the real supply-demand rhythm after EIA confirmation.
• Current Combination Implication: Crude oil inventory draws but refined product inventory builds reflect high refinery operating rates but insufficient demand matching for refined products.

• International Energy Agency (IEA): A surplus of approximately 4 million barrels per day may occur in 2026, corresponding to nearly 4% of demand [6].
• Multiple Institutions: Brent crude oil average price may hover in the mid-$50 range [6].
• Neutral Scenario: If OPEC+ does not significantly cut production and demand does not exceed expectations, oil prices have limited rebound space [6].

• XLE (Energy Sector ETF, Past 30 Trading Days): Closed at $44.62 during the period, with a range return of approximately -2.92%, 20-day moving average of $45.07, and daily volatility of approximately 1.13% [0]; YTD approximately +2.98%, 1Y approximately +5.53% [0].
• USO (Crude Oil ETF, Past 30 Trading Days): Closed at $69.61 during the period, with a range return of approximately -2.78%, and higher volatility than XLE [0].
• Intra-Sector Performance: Sub-sectors show differentiation; energy equipment and components (e.g., NXT, EOSE, VICR) and construction/infrastructure (e.g., TPC, AGX, FIX) have significant annual gains, with some individual stocks rising over 100%, reflecting strong demand for equipment and services driven by infrastructure and electrification/AI data centers [4][7].

• Industrial and Energy Equipment: XLI rose approximately 19.15% in 2025 [4], indicating capital expenditure and new infrastructure driving related chains.
• Power and “AI Power Supply” Theme: Nuclear power, renewable energy, natural gas equipment, and even the coal sector all strengthened under expectations of power supply gaps for AI data centers [7]; nuclear power/uranium and turbine-related targets rose significantly during the year [7].

• S&P 500/Nasdaq/Dow Jones rose approximately +2.86%/+3.01%/+2.96% in the past 30 trading days, with lower volatility than energy assets, reflecting the market’s current risk preference still leaning toward high-certainty and growth sectors [0].
• The energy sector benefits from supply-side risk premiums and high prosperity in some sub-sectors, but is constrained by weak refined product demand and macro demand concerns, with overall elasticity slightly weaker than short-term oil price fluctuations.

• Current Federal Funds Rate Range: 3.75%-4.00% (end of 2025).
• Market Expectations: Approximately one more rate cut may be implemented in 2026, but the path and terminal rate remain uncertain, depending on data and inflation path [9].

• November Inflation: Overall growth narrowed significantly as rent fell; however, factors like government shutdown led to discussions of “distorted” data, with some officials believing actual inflation may be underestimated by 0.1-0.3 percentage points [9].
• Oil Prices and Inflation: Oil prices have a transmission effect on CPI and PCE. If supply risks push oil prices to rebound continuously, it will raise inflation readings related to energy and services, thereby constraining the Fed’s rate cut space.

• U.S. Dollar Index: Overall weak in 2025 under the Fed’s rate cut background, but fiscal deficits and Treasury supply pressure make it possible to strengthen “pulsively” in stages [8].
• Liquidity Structure: The relative advantage of U.S. dollar financing costs has narrowed; combined with rising ESG and compliance costs, bulk trade financing costs are higher than the historical average [8]. This will inhibit the turnover efficiency of crude oil trade and amplify the elasticity of supply-side shocks to oil prices.

• Downward Pressure: Weak global manufacturing prosperity and increased penetration of electric vehicles suppress refined product demand, forming a structural force of “demand-side suppression of inflation” [6].
• Upward Risks: Supply risks from Russia-Ukraine and the Middle East, scenarios of phased U.S. dollar strengthening/liquidity tightening, and rising electricity and natural gas prices driven by “AI power supply” are all potential inflation upside risks [1][2][7][8].

• Chart Link: Comprehensive Analysis Chart of Energy Sector and Oil Prices
• Chart Content Overview:

1. XLE Price and Trading Volume: Overall volatility in 2025, phased fluctuations following geopolitical and inventory data.
2. USO Price and Trading Volume: Larger oil price fluctuations, obviously driven by short-term events.
3. Cumulative Return Comparison: XLE and USO show synchronized but differentiated yearly trends, reflecting intra-sector structure and weight differences.
4. 20-Day Rolling Volatility: Shows the volatility characteristics of energy assets, which amplify in event windows and macro data windows.
5. Moving Average System: 20/50/200-day moving averages provide trend and resistance/support references.

• Short-Term (1-3 Months): Focus on event-driven and hedge allocation. If geopolitical risks further rise, crude oil inventory draws or refined product demand improves, XLE and upstream leaders have rebound repair space; use volatility products or derivatives for hedging.
• Medium-Term (3-12 Months):
• Structural Opportunities: Equipment and infrastructure (refining and chemical expansion/renovation, pipelines and storage, export terminals), natural gas and nuclear energy (AI data centers/grid upgrades), renewable energy and power companies.
• Diversification and Screening: Use ETFs like XLE/XOP to diversify individual stock risks, combined with leaders with order visibility and capacity ramp-up verification.

• Energy Equipment and Components: NXT, EOSE, VICR, etc., significantly driven by renewable energy/smart grid/AI-related factors [4].
• Construction and Infrastructure: TPC, AGX, FIX, IESC, etc., benefit from infrastructure policies and increased capital expenditure [4].
• Nuclear Energy and Uranium: Cameco, Oklo, etc., saw significant stock price increases under “AI power supply” and accelerated nuclear power policies [7].

• Unexpected Supply Easing: If geopolitical tensions ease, supply from Russia-Ukraine/Middle East is replenished, and OPEC+ does not further cut production, oil prices and energy stock valuations will come under pressure.
• Demand Shortfall: Global growth downturn, weak manufacturing, and continuous penetration of electric vehicles suppress refined product growth rates.
• Interest Rates and Liquidity: Fed rate cuts fall short of expectations or the U.S. dollar strengthens in stages, suppressing risk assets and financing environments.
• Hedging Methods: Use USO/CL futures, volatility products, or cross-sector long-short portfolios (e.g., growth vs. energy) to hedge Beta risks.

• Geopolitics: Assessment of damage to Russian refineries/oil fields/ports, Middle East situation, U.S.-Venezuela relations, etc. [1][2][3].
• Inventories: Leading API and confirming EIA crude oil and refined product inventories, as well as changes in operating rates and net imports [5].
• Macroeconomics: U.S. employment and inflation, Fed forward guidance, U.S. dollar index and interest rate spreads [9][8].
• Demand Side: China/Europe/U.S. manufacturing PMI, transportation fuel and chemical demand, electric vehicle penetration rate and policies [6].

• Geopolitical events (Ukrainian attacks on Russian refining capacity/Russia’s repair difficulties, peace process obstacles, Middle East and U.S.-Venezuela risks) have raised the supply risk premium, providing phased upward support for oil prices [1][2][3].
• U.S. inventory data shows divergence between the API caliber (week ending December 19) and EIA caliber (week ending December 12): API shows simultaneous increases in crude oil and refined products, while EIA shows crude oil inventory draws but refined product inventory builds; the latest trend needs to wait for the delayed EIA confirmation [5].
• The energy sector shows obvious structural differentiation in the year: equipment and infrastructure, nuclear power/renewable energy/AI power supply chains performed prominently; traditional upstream leaders fluctuated with oil prices; overall XLE had limited annual gains but saw phased repair at the end of the year [0][4][7].
• Macroscopically, the current federal funds rate is 3.75%-4.00% (end of 2025); the market expects approximately one rate cut in 2026, but the path is uncertain; inflation is still above the target; oil price rebounds will constrain the Fed’s easing pace [9].
• Investment strategy suggests combining “event-driven + structural allocation”: grasp short-term trading opportunities driven by geopolitical and inventory data, and focus on high-prosperity sub-sectors like equipment/infrastructure, nuclear energy, and power in the medium term; use ETFs and derivatives to hedge Beta risks.

[0] Gilin API Data - Energy and Crude Oil ETF, Sector and Index Data
[1] Gaobo New Vision - “Starting from the Second Half of 2025, Ukraine Frequent Bombings of Russian Energy Facilities, How Long Can Russia’s Economy Hold?” (NetEase)
[2] Yahoo Finance/Cnyes Compilation - “〈Energy After Hours〉Russia-Ukraine Peace Prospects Frustrated, Yemen Situation Escalates, Crude Oil Rises Over 2%”
[3] Huasheng Tong/Caixin Global - “Geopolitical Tensions Continue to Disturb Global Energy Market, International Oil Prices Fluctuate and Rise”
[4] CMoney - “U.S. Industrial Sector Ends 2025 Strongly, Energy and Engineering Stocks Soar Hundredfold!”
[5] CME Group - “U.S. Pursues Venezuelan Oil Tankers, International Oil Prices Rebound from Lows” (Attached EIA Inventory Table)
[6] Sinochem News/Sina Finance - “Global Oil Prices May First Decline Then Rise Next Year”
[7] Wall Street CN - “From Photovoltaics, Nuclear Energy to Coal ‘Full Takeoff’, How Long Can the U.S. Stock ‘AI Power Supply’ Theme Last?”
[8] Global Tiger Finance - “U.S. Dollar and Oil Prices in the Transfer of Energy Power” (NetEase)
[9] Investing.com - “Needle vs. Needle: Record of Fed Internal Division in 2025, May Be More Exciting in 2026”

(This analysis does not constitute investment advice. The market has risks, and decisions should be combined with one’s own risk tolerance and professional advisor opinions.)