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Wednesday, 22. May 2024

Oil prices stable amid Russian supply disruptions

3angleFX

Oil prices held steady on Tuesday, following a previous session’s uptick, as investors assessed the impact of recent Ukrainian attacks on Russian refinery capacity. The market sentiment was mixed, with some investors viewing the situation cautiously. Additionally, a slightly weaker U.S. dollar provided some support to oil prices.

Brent crude futures for May edged down by 12 cents to $86.63 a barrel, while U.S. West Texas Intermediate (WTI) crude futures dipped by 8 cents to $81.87 a barrel at 1005 GMT.

Brent crude rose by 1.5% in Monday’s session, while WTI gained 1.6% higher. This surge followed Russia’s government ordering companies to reduce output in the second quarter to meet a target of 9 million barrels per day (bpd), as part of pledges to the OPEC+ consumer group.

Goldman Sachs analysts estimate that recent attacks on Russian oil refineries by Ukraine have disrupted approximately 900,000 barrels per day (bpd) of capacity. They suggest that these disruptions could last for weeks and, in some cases, result in permanent damage to the facilities.

“The impact of refining disruptions on crude prices is mixed, with a bearish effect from the decline in refinery demand and a bullish effect from the potential reduction in Russia oil exports,” said the analysts in a note.

Following a Ukrainian drone attack on Saturday, Russian oil producer Rosneft closed a 70,000 barrels per day (bpd) crude unit at its Kuibyshev refinery located in the city of Samara.

The effects of the attacks and Russian production cuts on oil prices remained uncertain, although a modest decline in the value of the U.S. dollar from the previous session provided some support to prices.

Indeed, a weaker dollar often makes oil purchases cheaper in other currencies, potentially boosting overall demand for oil.

“The USD may continue to face downside pressure as the Fed is expected to cut rates later this year, which potentially offers the bullish factor to oil prices,” said Tina Teng, independent market analyst.

The ongoing Israel-Gaza conflict has been contributing to rising geopolitical premiums, supporting oil prices. However, the immediate impact on supplies in the Middle East region is still uncertain.

 

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