Onome Amuge
Oil advanced on Monday as traders weighed the fallout from Ukrainian drone attacks on Russian energy infrastructure and mounting political pressure from Washington on NATO allies to curtail purchases of Russian crude.
Brent crude, the international benchmark, settled up 45 cents, or 0.7 per cent, at $67.44 a barrel, while US marker West Texas Intermediate rose 61 cents, or nearly 1 per cent, to $63.30. Both contracts added more than 1 per cent last week, extending gains as Kyiv intensified strikes on Russia’s refining and export assets.
One of Russia’s largest refineries in the northwestern town of Kirishi halted a key processing unit over the weekend after sustaining damage in a drone attack, according to two industry sources. The plant processes about 355,000 barrels per day of crude which is equivalent to 6.4 per cent of Russia’s refining capacity,raising concerns over near-term supplies of heavy oil and diesel.
Ukraine has also targeted Primorsk, the country’s largest crude-exporting terminal with capacity of one million bpd. While exports from the Baltic port have not yet been disrupted, the escalating strikes highlight the vulnerability of Russian energy flows that remain critical to global supply.
Meanwhile, US President Donald Trump sharpened the geopolitical backdrop over the weekend by demanding NATO allies halt Russian oil imports as a condition for new sanctions. “The US is prepared to impose fresh energy sanctions on Russia, but only if all NATO nations cease purchasing Russian oil,” he said on Saturday.
The comments raised questions over the coherence of western energy policy, as several European nations remain dependent on discounted Russian crude and refined products, despite ongoing efforts to diversify supplies since Moscow’s invasion of Ukraine.
Phil Flynn, senior analyst at Price Futures Group, said: “Behind the scenes there are a lot of concerns around heavy oil and tight diesel supplies, keeping the market supported.”
Beyond geopolitics, fundamentals also lent support. Refinery demand in China remained solid last month, even as broader economic data from the world’s second-largest oil consumer painted a weaker picture. In the US, crude stockpiles fell more than expected, according to government data, underpinning optimism around near-term balances.
Attention is also turning to the Federal Reserve, which meets on September 16-17 and is expected to cut interest rates to cushion the economy from slowing growth. Lower borrowing costs would support fuel consumption and, by weakening the dollar, make crude cheaper for holders of other currencies.
“The market is starting to price in maybe a more aggressive Fed cut, putting some downward pressure on the US dollar and giving oil a boost,” Flynn added.
The greenback slipped against a basket of peers on Monday, extending recent losses triggered by weaker US job creation and stubbornly high inflation. A softer dollar typically bolsters dollar-denominated commodities such as crude.
Oil markets remain caught between supply-side risks from conflict in eastern Europe and fragile demand expectations, particularly in Asia. UBS analyst Giovanni Staunovo noted that Chinese data on factory output and retail sales were “not exactly pretty”, limiting enthusiasm for a sustained rally.
Still, with Russia’s refining system under renewed strain and Washington pressing allies on sanctions, traders expect geopolitical risk to keep a floor under prices in the short term.
