Oil rose as pressure mounted on Russia’s oil industry and the conflict in the Middle East flared up.
West Texas Intermediate climbed 1.9% to top $64 a barrel after Reuters reported that Russia’s Transneft pipeline, which handles more than 80% of the country’s oil, has restricted firms’ ability to store crude. Transneft later denied the report, but prices remained elevated. Ukraine attacked another Russian refinery overnight as Western nations consider fresh sanctions in a bid to push President Vladimir Putin to the negotiating table.
Ukrainian military forces have intensified drone strikes on Russian energy facilities in recent weeks, including the country’s largest Baltic oil terminal in Primorsk. The full effect of the attacks on Moscow’s oil flows is unclear, but data is starting to show depressed refinery runs and analysts are forecasting more to come, potentially threatening the petrodollars that fund Russia’s war effort and tighten global oil balances.
“The attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil prices,” JPMorgan Chase & Co. analysts led by Natasha Kaneva wrote in a note, referring to Primorsk. Russian refining runs have now dropped below 5 million barrels a day, the lowest since April 2022, the firm said.
Meanwhile, the European Union delayed formally tabling a latest package of sanctions on companies in India and China that enable Moscow’s oil trade as part of a package of fresh restrictions. Washington earlier implied that the US wouldn’t follow through with threats to penalize Russian oil unless Europe also does so.
Elsewhere, Israel launched an aerial onslaught on the Yemeni port city of Hodeida, according to the Associated Press. The moves threaten to escalate the conflict in the Middle East and endanger supplies from a region that produces about a third of the world’s crude.
Futures have traded in a narrow range in the past month, hemmed in by the opposing forces of geopolitical tensions and bearish fundamentals. A faster-than-scheduled return of OPEC+ supply has prompted the International Energy Agency to forecast a record glut next year.
Commodities including oil may find support from an expected Federal Reserve interest-rate cut expected this week on the prospect that monetary easing would stimulate the US economy and increase energy demand.
Still, some oil market metrics are pointing to softness. The prompt spread for WTI — the difference between its two closest contracts — was at 37 cents a barrel on Tuesday, down from almost $1.50 two months ago, narrowing a bullish structure known as backwardation.
Oil Prices
WTI for October delivery gained 1.9% to settle at $64.52 a barrel in New York.
Brent for November settlement rose 1.5% to settle at $68.47 a barrel.
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