Oil prices climbed to multi-month highs for the second consecutive session on Tuesday, driven by speculation surrounding the impact of Ukraine’s recent assaults on Russian refineries on global petroleum supply. (United States) US West Texas Intermediate crude futures surged by 0.9%, or 75 cents, settling at $83.47 a barrel, marking their highest level since October 27. The global benchmark Brent crude also saw a 0.6% increase, settling at $87.38 a barrel, the highest since October 31.
Ukraine’s escalated attacks on Russian oil infrastructure, particularly targeting at least seven refineries with drones this month, have led to the shutdown of approximately 7%, equivalent to about 3,70,500 barrels per day, of Russian refining capacity, according to Reuters calculations.
While the diminished refining activity has prompted a rise in Russian crude oil exports, it may also result in production cuts due to storage constraints, noted StoneX energy analyst Alex Hodes. Hodes’ analysis suggests that the attacks on Russian refineries could lead to a reduction of around 3,50,000 barrels per day in global petroleum supplies, potentially increasing US crude prices by $3 per barrel.
Even without a direct loss of Russian crude supply, there could still be an indirect impact on oil prices stemming from elevated refined product margins, as highlighted by SEB Research analyst Bjarne Schieldrop.
Oil prices found additional support from decreased crude exports from Saudi Arabia and Iraq, coupled with indications of strengthened demand and economic growth in China and the US. The Commerce Department’s report on a significant rebound in US single-family homebuilding in February suggests potential support for economic growth and, consequently, oil demand.
UBS analyst Giovanni Staunovo noted that positive surprises in oil demand data, coupled with the extension of voluntary OPEC+ cuts until the end of June, have underpinned prices. Staunovo anticipates Brent Crude to trade within a range of $80-90 per barrel this year, with a forecast of $86 per barrel by the end of June.
Market attention is now turning to the American Petroleum Institute’s report on U.S. oil and fuel inventories, scheduled for release after 4:30 p.m. ET (2030 GMT), followed by official figures from the U.S. Energy Information Administration at 10:30 a.m. ET (1430 GMT) on Wednesday.
(With inputs from Reuters)
