Oil climbs amid global supply risks, uncertainty over Ukraine crisis

Onome Amuge

Oil prices edged higher on Wednesday, as markets digested worries of potential disruptions in U.S. and Russian oil supplies and anxiously awaited updates on Ukraine peace talks.

Brent crude futures advanced 0.5 percent to $76.25 a barrel, setting the stage for a third consecutive day of gains as traders weighed in on market developments.

U.S. West Texas Intermediate crude futures for March gained 0.6 percent, reaching $72.29, marking a 2.2 percent increase from Friday’s close. The March contract is set to expire on Thursday, while the April contract climbed 0.6 percent to $72.25.

Tony Sycamore, a market analyst at IG, opined that the crucial psychological level of $70 a barrel has been maintained, supported by a recent drone attack on a Russian oil pumping station by Ukraine and concerns over cold weather in the U.S. potentially disrupting domestic supply.

Sycamore further pointed out that there is speculation among market participants that OPEC+, which includes the Organization of the Petroleum Exporting Countries and its allies, could potentially delay their planned supply increase in April

In a recent development, Russia reported a reduction in crude exports from Kazakhstan via the Caspian Pipeline Consortium (CPC), a crucial conduit for oil exports from the Central Asian country, due to a recent drone attack on a pumping station by Ukraine.

The reported 30 percent-40 percent drop in flows through the pipeline would amount to a daily loss of approximately 380,000 barrels of supply to the global oil market, based on Reuters calculations, causing concerns over potential disruptions to supply and placing upward pressure on oil prices.

Meanwhile, cold temperatures in the U.S. also presented a challenge to the country’s energy production, with the North Dakota Pipeline Authority predicting that the country’s third-largest oil-producing state could see a decline in output of up to 150,000 barrels per day.

While hopes of de-escalating tensions in Ukraine continue to linger, the road to peace may prove challenging, as evidenced by Ukrainian President Volodymyr Zelenskiy’s decision to postpone a planned trip to Saudi Arabia where U.S. and Russian officials had convened for discussions on the conflict.

Kelvin Wong, senior market analyst at OANDA, observed that this development underscores the ongoing volatility in the geopolitical landscape

The prospect of a sustained ceasefire between Israel and Hamas, which has led to both sides engaging in indirect negotiations for the second stage of a Gaza truce agreement, has raised hopes for a potential alleviation in oil prices.

By reducing the possibility of disruptions to oil supplies from a conflict in the region, the prospect of a long-term ceasefire would lessen the geopolitical risk premium attached to oil prices, analysts assert.

While the Trump administration’s ongoing push for more tariffs may be a boon for American producers, it could prove detrimental to the global economy and consequently to oil prices by raising the prices of imported goods, diminishing consumer spending, and weakening economic activity.

As the President announced his intention to impose tariffs of around 25 percent on a range of critical goods, from automobiles to semiconductors and pharmaceuticals, investors are beginning to worry about the potential fallout, with some analysts predicting a negative impact on global economic growth that could reduce demand for oil