International crude oil prices again hit a four month-high mark on Tuesday, March 19, after breaking above range-bound trading last week, but gains were limited by the prospect of rising exports from Russia as Ukrainian attacks on oil infrastructure curb domestic refining activity.
The Brent crude oil futures contract was up 33 cents at $87.22 per barrel while US West Texas Intermediate (WTI) prices were up 31 cents at $82.47. The WTI April contract, which expires on Wednesday, was up 31 cents at $83.03, according to news agency Reuters. Both benchmarks hit highs not reached since early November, buoyed by lower crude exports from Saudi Arabia and Iraq along with signs of stronger demand and economic growth in China and the US.
What’s fueling crude oil prices?
-In Russia, exports are rising after Ukrainian drone attacks on the country’s oil infrastructure putting pressure on oil prices. Traders assessed how Ukraine’s recent attacks on Russian refineries would affect global petroleum supplies.
-Ukraine has stepped up attacks on Russian oil infrastructure this year, with at least seven refineries targeted by drones just this month. The attacks have shut down seven per cent, or around 370,500 barrels per day (bpd) of the Russian refining capacity, according to Reuters.
-According to JP Morgan analysts, the attacks will likely reduce Russian crude runs by up to 350,000 bpd, in addition to scheduled maintenance closures. This will boost US crude prices by $3 per barrel. The lower primary runs would lead to higher crude oil exports.
-Russia will increase oil exports through its western ports in March by almost 200,000 bpd, against a monthly plan for 2.15 million bpd. Even if the attacks do not lead to a direct loss of Russian crude supply, there is still a spillover effect for oil prices from surging refined product margins
Crude oil prices were also weighed down by uncertainty over US interest rates ahead of the US Federal Reserve policy meeting. Analyst expect Jerome Powell-led Federal Open Market Committee (FOMC) to maintain the status quo on interest rates.
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