Onome Amuge

Oil prices rose on Tuesday after a series of Ukrainian drone attacks on Russian ports and refineries heightened concerns over supply disruptions, while investors awaited the US Federal Reserve’s policy decision.

Brent crude futures gained $1.01, or 1.5 per cent, to $68.45 a barrel, while US benchmark West Texas Intermediate rose $1.21, or 1.9 per cent, to $64.51.

Russia’s oil pipeline operator Transneft has warned producers they may be forced to cut output following the strikes, according to three industry sources. Ukraine has intensified its targeting of Russia’s energy infrastructure in recent weeks, including an attack that temporarily disrupted exports from the Primorsk terminal in the Baltic Sea, one of Moscow’s main western outlets.

“An attack on an export terminal like Primorsk is aimed more at limiting Russia’s ability to sell its oil abroad, affecting export markets. More importantly, the attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil prices,”analysts at JPMorgan said. 

Goldman Sachs estimates that the strikes have removed about 300,000 barrels a day of Russian refining capacity in August and so far this month.

The disruptions have been particularly supportive for refined fuels. US diesel futures climbed 2.5 per cent, outpacing both WTI and gasoline. “Should Russian refineries suffer substantial damage, it could increase demand for US diesel exports and potentially sustain the inverted forward curve,” said Alex Hodes, energy analyst at StoneX.

Markets are also bracing for the outcome of the Federal Reserve’s September 16-17 meeting. The central bank is widely expected to cut interest rates, a move that could stimulate the US economy and boost fuel consumption. However, analysts cautioned that questions remain over the underlying strength of US growth.