Oil jumps in choppy trade amid CPC pipeline disruption

A worker holds a nozzle to pump gasoline into a car at a gas station in Mumbai, India, May 21, 2018. (Reuters) / Frances Mascarenhas

LONDON/NEW YORK (Reuters) – Oil prices rose in volatile trading on Wednesday, buoyed by the disruption to Russian and Kazakh crude exports via the CBC pipeline.

Brent crude futures rose $ 6.35, or 5.5 percent, to $ 121.80 a barrel at 11:00 am EST (1400 GMT). US West Texas Intermediate crude futures rose $5.72, or 5.2%, to $115 a barrel.

The market remains on alert due to the ripple effect of severe sanctions on Russia, the world’s second largest crude oil exporter, after its invasion of Ukraine. The oil market has been volatile for weeks, and after a sharp decline last week, crude oil futures in recent days have seen steady progress due to the uncertainty about the current supply.

Russia warned on Tuesday that oil exports through the Caspian Sea pipeline consortium could drop by as much as 1 million barrels per day, or 1% of global oil production, due to the storm-damaged piers. Read more

CPC exports were halted completely on Wednesday and repairs will take at least a month and a half, according to an agent for port ships. Read more

“Prices are rising mainly due to the loss of CPC blend crude exports from Novorossiysk, which account for about 1.3 million barrels per day of exports, adding more fuel to the fire as the decline in Russian crude exports appears to be finally starting,” Matt said. Smith, chief oil analyst for the Americas at Kpler.

US President Joe Biden is set to announce more Russian sanctions when he meets European leaders on Thursday in Brussels, including an emergency NATO meeting. Russia refers to the invasion, now a month old, as a “special operation.” Read more

EU member states remain divided over whether to ban the import of Russian crude and oil products, but that could change once short-term contracts run out.

“You will know at the end of April what the total losses for Russian oil are,” Ben Lowcock, of Trafigura, said at the FT Commodities Global Summit. He said that oil could reach $200 a barrel.

Declining crude stocks in the United States, the world’s largest oil consumer, added to supply concerns.

Federal data showed that US crude stocks fell by 2.5 million barrels for the week ending March 18, compared to expectations for a modest increase. Production remained flat at 11.6 million barrels per day for the seventh consecutive week.

Evidence of supply concern can be seen in the market structure, with forward month prices trading at a significant premium over the following months, as buyers scramble to secure supplies.

“I think you’re going to see a record low and you’re going to see $150 a barrel this summer,” Lowcock said.

Supporting news from the report was the second consecutive increase in inventories in Cushing, the center of Oklahoma, the delivery point for U.S. crude futures, where stocks rose by 1.2 million barrels.

Additional reporting by Sonali Paul and Mohi Narayan. Editing by Kirsten Donovan and Mark Potter

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