Oil prices rose sharply on Monday, with Brent crude gaining 3.2% to settle at US$73.30 per barrel, and US West Texas Intermediate (WTI) increasing by 3.2% to close at US$69.16 per barrel.

The surge was driven by the suspension of crude production at Norway's Johan Sverdrup oilfield and heightened geopolitical tensions stemming from the Russia-Ukraine conflict.

Equinor, the operator of Johan Sverdrup, halted output due to a power outage. Although efforts to restore production are underway, the disruption signals a potential tightening of North Sea crude supply, which underpins the Brent futures market. Meanwhile, Kazakhstan's Tengiz oilfield, operated by Chevron, has reduced production by up to 30% for repairs expected to conclude by Saturday, further straining global supply.

Escalation in the Russia-Ukraine war also bolstered prices. In a policy shift, US President Joe Biden authorised Ukraine to use American-made weapons for strikes deep into Russia. Analysts warn this decision could heighten geopolitical risks, potentially impacting oil prices if Ukraine targets Russian oil infrastructure.

Despite the price increase, oil markets remain under pressure. Last week, Brent and WTI fell more than 3% due to weak Chinese refinery data and an International Energy Agency forecast projecting a global oil surplus of over one million barrels per day by 2025, even with current OPEC+ output cuts.

WTI traders are shifting focus to the January contract ahead of the December contract's expiration on Wednesday, flipping the market into contango, where future prices exceed near-term contracts. This reflects expectations of further price increases.

Market participants remain vigilant over potential supply disruptions and geopolitical developments, which could influence oil's trajectory in the coming weeks.