Mar 26 2024: Oil prices remained relatively unchanged on Tuesday following a previous session’s increase, as market sentiment shifted amidst concerns over disruptions in Russian refinery capacity due to recent attacks in Ukraine. A slightly weaker U.S. dollar also provided some support to oil prices.
In early trading, Brent crude futures for May slipped 12 cents to $86.63 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 8 cents to $81.87 per barrel at 1005 GMT.
Monday’s session saw Brent rising by 1.5% and WTI gaining 1.6%, following Russia’s government directive for companies to reduce output in the second quarter to meet a target of 9 million barrels per day (bpd) in compliance with agreements with the OPEC+ group.
Russia, a significant global oil producer and exporter, has faced challenges with recent attacks on its oil refineries by Ukraine. Goldman Sachs analysts estimated that these attacks have disrupted around 900,000 bpd of refining capacity, potentially affecting supplies for weeks or even permanently.
Analysts noted a mixed impact of these refining disruptions on crude prices, with a bearish effect from reduced refinery demand and a bullish effect from potential cuts in Russian oil exports.
In response to a Ukrainian drone attack on Saturday, Russian oil producer Rosneft shut down a 70,000 bpd crude unit at its Kuibyshev refinery in Samara.
While the full consequences of these events remain uncertain, the slightly weaker U.S. dollar from the previous session offered some support to oil prices. A weaker dollar typically makes oil purchases cheaper in other currencies, potentially boosting overall demand.
Market analyst Tina Teng highlighted expectations of continued downward pressure on the U.S. dollar, as the Federal Reserve is anticipated to cut rates later in the year, which could be a bullish factor for oil prices.
Additionally, rising geopolitical tensions, such as the Israel-Gaza conflict, lent support to oil prices due to increased geopolitical premiums, although the immediate impact on supplies in the Middle East remains to be seen.