Oil Rises As Reduced Russia Output Capacity Due To Ukraine Strikes Is Assessed
Oil prices rose again on Tuesday, as supply concerns remained high thanks to Ukraine drone attacks on Russian infrastructure causing speculation that the former Soviet Union may have to cut output.
As of 1636 GMT, Brent was up $1.01 at $68.45 per barrel, and West Texas Intermediate rose $1.21 to $64.51 per barrel.
Industry sources told media that Transneft warned producers they may have to cut output following Ukrainian attacks on export ports and refineries, including Russia‘s key western oil terminal Primorsk.
Goldman Sachs estimated that the attacks have removed about 300,000 barrels per day (bpd) of Russian refining capacity since August; and JPMorgan analysts stated, “An attack on an export terminal like Primorsk is aimed more at limiting Russia’s ability to sell its oil abroad, affecting export markets.”
Alex Hodes, energy analyst at StoneX, added that the damage to Russian infrastructure “could increase demand for U.S. diesel exports and potentially sustain the inverted forward curve.”
For the record, sources seemed to think the loading schedules at Primorsk would be delayed by just a few days.
Contributing to Tuesday’s worries was Israel, which launched an aerial attack on the Yemeni port city of Hodeida, in turn stoking familiar fears that the conflict could expand in the Middle East and affect supplies in that part of the world.
Still, the oil market remained mired in bearish sentiment, and Bloomberg pointed out that “some oil market metrics are pointing to softness: the prompt spread for WTI — the difference between its two closest contracts — was at 36 cents a barrel on Tuesday, down from almost $1.50 two months ago, narrowing a bullish structure known as backwardation.”
In other oil news on Tuesday, trade sources told media that the discount for Iran crude selling in China has increased to over $6 per barrel compared to Brent’s price, up from $5 per barrel discount at the start of September and from a $3 per barrel discount in March.
The discounts come as stocks at key import hubs of independent refiners have reached record highs, and despite U.S. sanctions hindering imports at some major oil import hubs in the province of Shandong.
