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Oil Rises to Multi-Month Highs on Russian Supply Concerns

Oil Rises to Multi-Month Highs on Russian Supply Concerns

Oil prices rose to multi-month highs for the second straight session on Tuesday, as traders assessed how Ukraine’s recent attacks on Russian refineries would affect global petroleum supplies.

U.S. West Texas Intermediate crude futures rose to their highest since October, up by 94 cents, or 1.1%, to $83.66 a barrel by 2:06 p.m. EST (1806 GMT) .

Global benchmark Brent crude rose 62 cents, or 0.7%, to $87.51 a barrel, the highest since Nov. 3.

Based on Hodes’ calculations, the attacks on Russian refineries could result in a decrease of around 350,000 bpd of global petroleum supplies and boost U.S. crude prices by $3 per barrel.

Even if the attacks do not lead to a direct loss of Russian crude supply, there is still a spillover effect for oil prices from surging refined product margins, SEB Research analyst Bjarne Schieldrop wrote on Monday.

Ukraine has stepped up attacks on Russian oil infrastructure this year, with at least seven refineries targeted by drones just this month. The attacks have shut down 7%, or around 370,500 barrels per day, of Russian refining capacity, Reuters calculations show.

While lower refining activity has led to an increase in Russian crude oil exports, it could also lead to crude oil production cuts as the country faces storage constraints, StoneX energy analyst Alex Hodes said.

Oil gained support from declining crude exports from Saudi Arabia and Iraq, as well as signs of stronger demand and economic growth in China and the U.S.

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U.S. single-family homebuilding rebounded sharply in February, the Commerce Department reported. Homebuilding could boost economic growth, supporting oil demand.

“Oil demand data surprising on the positive side and the extension of the voluntary OPEC+ cuts until the end of June have supported prices,” said UBS analyst Giovanni Staunovo.

“Brent will likely trade in an $80-90 per barrel range this year, with an end-June forecast of $86 per barrel,” Staunovo said.

Reuters

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