Brent Nears $89 on Escalating Supply Threats

April 3, 2024
Brent crude futures

By Adedapo Adesanya 

Brent crude prices pushed close to $89 per barrel as Ukrainian attacks on Russian energy facilities and escalating conflict in the Middle East raised supply worries.

On Tuesday, the international crude benchmark gained $1.50 or 1.7 per cent to trade at $88.92 per barrel, and the US West Texas Intermediate (WTI) crude futures appreciated by $1.44 or 1.7 per cent to $85.15 per barrel.

A Ukrainian drone struck one of Russia’s biggest refineries in an attack Russia initially said it repelled.

The company said that Russia’s Astrakhan gas processing plant, controlled by energy giant Gazprom, also halted production of petroleum products after a repair-related stoppage on March 30.

The impact of the attack suggests it hit the refinery’s primary oil refining unit, which accounts for about half of the plant’s total annual production capacity of 340,000 barrels per day.

Ukraine has in recent months begun attacking the oil refineries of Russia, the world’s second-largest oil exporter, impacting the country’s highly lucrative trade in refined products, amid extensive Russian missile strikes on Ukraine’s energy grid.

Almost 15 per cent of Russia’s refining capacity has been shut down by drone attacks which Ukraine says is justified because it is fighting for survival and has suffered damage to its infrastructure from Russian air strikes.

The attacks on Russian refineries have raised concern, particularly by the US about the potential for escalation with Russia.

In the Middle East, Iran has vowed to take revenge on Israel for an airstrike that killed two top generals and five military advisers at the Iranian embassy compound in Damascus.

Israel has been at war against the Iran-backed Palestinian group Hamas in Gaza and analysts warned that direct Iranian involvement would spark a wider conflict with a plausible impact on oil supply.

According to market sources citing American Petroleum Institute (API) figures on Tuesday, US crude oil inventories fell by 2.3 million barrels last week.

The market will await official government data from the US Energy Information Administration (EIA) which will be published later on Wednesday.

Markets are also looking ahead to Wednesday’s ministerial panel meeting of the Organization of the Petroleum Exporting Countries and its allied producers collectively known as OPEC+.

However, the panel is unlikely to recommend any change in oil output policy.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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