Oil rises as Russian pipeline shutdown reignites supply fears

Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

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  • Russia’s oil exports halted via southern section of Druzhba pipeline
  • EU proposes ‘final’ text to resuscitate Iran nuclear deal
  • Recession, fears about demand also weigh on the market
  • Coming soon: API Provisioning Report, 2030 GMT

LONDON, Aug 9 (Reuters) – Oil rose more than $1 a barrel on Tuesday, reversing an earlier decline, after Russia said oil exports to Europe via the southern branch of the Druzhba pipeline had been suspended since early August, reigniting concerns about limited supplies.

Russian pipeline monopoly Transneft said Ukraine suspended oil flows through the section of the pipeline because Western sanctions prevented Moscow from paying transit fees. Read more

“It’s not that we need it at this point, but it’s another reminder of market tension and price sensitivity to supply disruptions, particularly from Russia,” he said. said Craig Erlam of brokerage firm OANDA.

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Brent rose $1.28, or 1.3%, to $97.93 a barrel as of 11:36 GMT, after falling to $94.90 earlier. U.S. West Texas Intermediate (WTI) crude gained $1.18, or 1.3%, to $91.94.

Druzhba’s development comes as supply worries had eased amid growing concerns about a recession. Earlier, oil was under pressure from progress in talks to revive the Iran nuclear deal, which would see an increase in Iranian oil exports.

Tamas Varga of oil broker PVM said the pipeline shutdown and general skepticism surrounding the Iran nuclear deal likely prompted the rally. “Having said that, the suspension should really have a short-term impact, in my opinion,” he said.

The European Union proposed “final” text on Monday to revive the 2015 deal. A senior EU official said a final decision on the proposal, which requires the approval of the United States and the EU. Iran, was expected in “very, very few weeks”. Read more

Talks have dragged on for months without a deal. Yet Iran’s crude exports, according to tanker trackers, are at least 1 million barrels a day below their 2018 rate when US President Donald Trump quit the nuclear deal, so an agreement could allow a considerable increase in supply.

Oil soared earlier in the year as Russia’s invasion of Ukraine added to supply problems, with Brent hitting $139 in March, near its all-time high.

Brent crude fell to $92.78 on Friday, its lowest level since February, as the Bank of England’s warning on Thursday of a prolonged slowdown intensified fears of a slowdown in fuel consumption.

The latest round of weekly US oil supply reports are in view, first from the American Petroleum Institute at 20:30 GMT. Analysts expect a small drop of 400,000 barrels in crude inventories.

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Additional reporting by Sonali Paul and Emily Chow Editing by Louise Heavens and Mark Potter

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