Oil prices rose on Tuesday as traders assessed the fallout from drone attacks on a key conduit for Kazakhstan’s oil exports, while talks to end the war in Ukraine turned traders cautious as it could boost Russian supplies.
Brent crude futures rose 61 cents to $75.83 a barrel by 1:38 p.m. EST, while U.S. West Texas Intermediate crude futures rose $1.10, or 1.6 per cent, to $71.84 a barrel, catching up with the gains Brent registered on Monday, when the U.S. contract traded without settlement due to a holiday.
Brent rose 48 cents in the previous session after Ukrainian drones attacked a pumping station in Russia on the Caspian Pipeline Consortium pipeline, which moves crude from Kazakhstan to world markets.
Kazakhstan’s oil exports could decline by 30 per cent for up to two months due to the drone attacks, which caused “serious damage,” Transneft said. That would equate to reducing global oil supply by as much as 380,000 barrels per day, per Reuters calculations.
“Brent already benefited yesterday from the CPC supply disruptions, but generally it will come down to how long and how big the disruption is,” UBS analyst Giovanni Staunovo said.
Oil markets received another supply shock on Tuesday as Russia’s Black Sea port of Novorossiisk suspended loadings due to a storm, two sources familiar with the matter said.
Exports from the port were revised up by 0.24 million metric tons from an initial plan to 2.25 million tons or some 590,000 barrels per day, sources said Monday.
Keeping prices in check, U.S. and Russian delegates held a 4-1/2-hour meeting in Saudi Arabia to discuss ways to halt the deadliest conflict in Europe since World War II. Ukraine was not represented and Russia hardened its demands.
If a deal is reached, Washington and its allies could abandon sanctions on Russian oil supplies.
“Everyone is waiting on what is going to happen with Russia and Ukraine,” Mizuho oil analyst Robert Yawger said. “That’s not something that’s going to happen in the next 15 minutes, so the market is going to stay cautious,” he added.
In a potential boost for oil prices in upcoming sessions, U.S. inventories and trade data due on Thursday could show lower net-imports for crude oil last week, Staunovo said.
However, expectations of a heavy refinery maintenance season could weigh on crude oil demand in the weeks ahead.
“There is plenty of crude out here on the offer with refinery turnarounds beginning in March seen as heavy,” United ICAP Energy Specialist Scott Shelton told clients in a note on Tuesday.
Traders are also waiting for clarity on whether OPEC+ will proceed with plans to boost oil supply from April, or delay that to a later date.
Given that oil prices have dropped sharply in recent weeks – Brent traded over $80 a barrel in mid-January – more OPEC+ supply going into April will weigh heavily on the market, Mizuho’s Yawger said.
