By Adedapo Adesanya
Oil settled slightly lower on Tuesday after news that some exports had been suspended on the Russia-to-Europe Druzhba pipeline that transits Ukraine.
Crude prices have been under pressure for weeks as fears mounted that a recession could cut oil demand but yesterday, the Brent crude lost 34 cents or 0.4 per cent to trade at $96.31 a barrel as the United States West Texas Intermediate (WTI) crude fell by 26 cents or 0.3 per cent to $90.50 a barrel.
Ukraine halted oil flows on the Druzhba oil pipeline to parts of central Europe because Western sanctions had prevented a payment from Russia for transit fees from going through.
Flows along the southern route of the Druzhba pipeline have been affected while the northern route serving Poland and Germany was uninterrupted.
Oil initially moved higher on the pipeline news and expectations that the shutdown would tighten supplies, but prices reversed course as details became clearer around what caused the disruption and that flows were expected to resume within days.
Prices were pressured by talks of a last-ditch effort by European nations to revive the Iran nuclear accord.
On Monday, the European Union put forward a “final” text to revive the 2015 Iran deal, adding that it was expected within “very, very few weeks”.
Iran’s crude exports are at least 1 million barrels per day below their rate in 2018 when former US President Donald Trump exited the nuclear agreement.
US crude oil inventories were also signalling slacking demand, according to market sources citing American Petroleum Institute (API) figures.
The industry watcher reported a surprise build this week for crude oil of 2.156 million barrels, while analysts predicted a draw of 400,000 barrels.
The build comes as the Department of Energy (DOE) released 5.3 million barrels from the Strategic Petroleum Reserves in the week ending August 5, to 464.6 million barrels.
US crude inventories have shed some 61 million barrels since the start of 2021, with a 2 million barrel gain since the start of 2020, according to API data.
In the week prior, the API reported a surprise build in crude oil inventories of 2.165 million barrels after analysts had predicted a draw of 467,000 barrels.
Official government data from the Energy Information Administration (EIA) is due on Wednesday.
