Oil Jumps as Russian Port Attack and Sanctions Offset Glut Angst

pljlvi1cgl2q02nue1q3hrmz_media_dl_1.png CME

Article content

(Bloomberg) — Oil advanced as risks to Russian flows from Ukrainian strikes and tougher US sanctions countered signs the market faces a punishing glut.

Article content

Global benchmark Brent spiked as much as 3% in a rapid move toward $65 a barrel, before paring gains, while West Texas Intermediate was near $60. An oil depot and a vessel were damaged in a major drone attack on Novorossiysk, according to local authorities in the vital Black Sea port, which handles cargoes from Russia as well as exports from Kazakhstan.

Article content

Article content

Article content

In addition to the military action, Washington recently sanctioned Rosneft PJSC and Lukoil PJSC to raise the pressure against Moscow over the war, with curbs to kick in within days. On Thursday, the International Energy Agency warned the moves pose “considerable” risk to its outlook for Russian output.

Article content

Article content

Traders are also monitoring the seizure by Iranian forces of an oil tanker sailing in the Gulf of Oman. While authorities are still confirming the nature of the diversion toward the country’s territorial waters, Friday’s event would add to concerns that Iran is turning to hijacking merchant ships again.

Article content

Brent crude remains about 14% lower this year, hurt by the mounting expectations for a glut. The Organization of the Petroleum Exporting Countries and its allies have been restarting idled capacity in a bid to recapture market share, while nations outside the group have also raised production.

Article content

“We’re seeing a familiar pattern here, with frequent temporary spikes and steep corrections,” said John Driscoll, founder and director of JTD Energy Services Pte. Risks from Ukrainian attacks on Russian facilities, sanctions and geopolitical uncertainty, coupled with demand for oil for the year-end, are coming together to temper the correction, he said.

Article content

Article content

Traders have been assessing the cumulative impact on Russia’s energy infrastructure of the Ukrainian strikes, which have largely comprised a series of long-range attacks on ports and refineries. The assaults are an effort to reduce the energy revenue that helps Moscow finance its war.

Article content

In the Novorossiysk attack, falling debris caused a fire at the depot located at Transneft PJSC’s Sheskharis oil terminal, the regional emergency service said. The blaze was put out after more than 50 units of firefighting equipment were deployed, authorities said, but provided no details on the damage.

Article content

Kazakhstan said it continued to ship oil after the strike, with the country’s energy ministry in contact with Russian pipeline operator Transneft to obtain up-to-date information.

Article content

Ukraine last struck Russia’s Black Sea oil-loading infrastructure in late September. That attack forced the Sheskharis terminal and the Caspian Pipeline Consortium loading facilities to briefly halt, before resuming operations. 

Article content

Elsewhere, OPEC member Venezuela was in focus with the arrival in the region of a US strike group led by the USS Gerald R. Ford, the world’s largest aircraft carrier. Military officials showed US President Donald Trump options for potential operations in the country in the coming days, CBS News said. In recent weeks, Washington has built up forces in the southern Caribbean, and blown up vessels near Venezuela’s coast suspected of trafficking drugs.

Article content

—With assistance from Weilun Soon and Yongchang Chin.

Article content