Oil prices showed little change on Tuesday, following an increase in the previous session. Investor sentiment towards the loss of Russian refinery capacity due to recent Ukrainian attacks was mixed, although a slightly weaker U.S. dollar provided some support.
At 05:41 GMT, Brent crude futures for May rose by 7 cents to reach $86.82 per barrel, while U.S. West Texas Intermediate (WTI) crude futures increased by 6 cents to $82.01 per barrel. In Monday’s trading session, Brent rose by 1.5 percent, and WTI gained 1.6 percent after the Russian government ordered companies to reduce output in the second quarter to meet a target of 9 million barrels per day (bpd) as part of their commitments to the OPEC+ consumer group.
Russia, one of the world’s top three oil producers and a major exporter of oil products, is currently facing challenges due to recent attacks on its oil refineries by Ukraine. According to Goldman Sachs analysts, these attacks have resulted in an estimated offline capacity of about 900,000 bpd, potentially causing disruptions for weeks or even permanently.
In a note, the analysts mentioned that the impact of refining disruptions on crude prices displays a mixed outcome. They observed a bearish effect resulting from the decline in refinery demand, as well as a bullish effect arising from the potential reduction in Russia’s oil exports.
Following a Ukrainian drone attack on Saturday, Rosneft, a Russian oil producer, shut down a 70,000 bpd crude unit at its Kuibyshev refinery in the city of Samara. While the consequences of the attacks and Russian production cuts remain uncertain, the slightly weaker U.S. dollar from the previous session offered some support to oil prices.
USD downside pressure, Fed rate cuts
Independent Market Analyst Tina Teng highlighted that the USD could potentially face downside pressure in the future. The reason behind this projection is the expected rate cuts by the U.S. Federal Reserve later this year. Moreover, Teng suggested that such a scenario might offer a bullish factor for oil prices.
Additionally, the ongoing Israel-Gaza conflict and the resulting geopolitical tensions contributed to the support for oil prices. However, it remains to be seen whether there will be an immediate impact on supplies in the Middle East region.
Senior Market Analyst Kelvin Wong at OANDA highlighted that the absence of a clear ceasefire breakthrough between Israel and Hamas has resulted in a positive geopolitical risk premium. Wong emphasized that this factor continues to play a significant role in supporting oil prices at the current juncture.
For more news on markets, click here.
