Again, oil prices rise as gas hits 2-year high, Europe goes back to coal

Oil prices rose as Russia’s production underperformed the Organisation of Petroleum Exporting Countries and allies (OPEC+) quotas, while sanctions and export bans further tightened global supply.

Energy sector in Ukraine and Russia continue to face drone assaults, while signs of tighter supplies in Russia and rising geopolitical tensions further pushed the energy complex higher. 

According to media reports, drones attacked a Russian oil refinery plant in the Saratov region. The affected plant is part of the Rosneft oil company known as Kreking, one of the oldest Russian oil refineries.

Meanwhile, Russia also targeted Ukraine’s gas and power facilities in an overnight attack. The international benchmark Brent crude rose by 0.5%, trading at $76.21 per barrel while the US benchmark West Texas Intermediate (WTI) increased by 0.5 per cent , reaching $72.55 per barrel, compared to its prior session close of $72.19.

Oil prices gained about two per cent in the previous session, driven by signs of tightening supply, rebounding after three consecutive weeks of losses.

Both benchmarks continued to climb on rising supply concerns as Russia’s oil production remained below the quota of OPEC+, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and some oil producers including Russia. Meanwhile, concerns that global trade tensions could negatively affect economic growth and the US Federal Reserve’s high interest rates are keeping price increases in check.

Additionally, news that European countries are planning to seize Russia’s ‘shadow fleet’ increased concerns in the markets. US sanctions targeting Russian oil tankers, producers and, insurers last month significantly disrupted Russian oil shipments to China and India.

Disruptions in Russia’s fuel exports are driving up cash oil prices, especially in the Middle East region. Russia’s Federal Monopoly Service imposed a one-month export ban on major producers to stabilize gasoline prices.

In addition, the US administration announced new sanctions on networks transporting Iranian oil to China. US President Donald Trump has reinstated the ‘maximum pressure’ policy on Iranian oil exports. The US Federal Reserve’s (Fed) announcement that it will not cut interest rates until the next quarter limited the upward price movement.