A Repsol Oil Operations oil drilling rig pounds into the desert searching through thousands of feet for and oil reserve in El-Sharara, Libya.
Benjamin Lowy | Getty Images
Oil prices rose Monday after Ukraine reportedly attacked a major Russia fuel terminal over the weekend, raising renewed concerns about supply disruptions.
The West Texas Intermediate futures contract for February gained $1.28, or 1.74%, to trade at $74.69 a barrel. The Brent contract for March rose $1.08, or 1.37%, to trade at $79.64 a barrel.
Ukrainian drones struck a major fuel processing and export facility near St. Petersburg, a sources in Kyiv told the BBC and The Wall Street Journal. The Ust-Luga facility processes gas condensate into jet fuel and fuel oil among other products.
“The Ukrainian drone attack on the Baltic port raises the question: Is this going to be a policy decision by Ukrainians to attack Russian oil infrastructure? If that’s the case, that’s a problem,” said Bob Yawger, managing director and energy futures strategist at Mizuho Americas.
The attack also raises the question of how many such facilities are vulnerable to drone strikes not just in Russia but elsewhere in the world, particularly in the Middle East, said Andrew Lipow, president of Lipow Oil Associates.
In the Middle East, meanwhile, several U.S. personnel are being evaluated for “traumatic brain injuries” after militants allied with Iran attacked an airbase in Iraq on Saturday with ballistic missiles and rockets, according to U.S. Central Command.
U.S. forces stationed in Iraq and Syria have repeatedly come under attack by Iran-allied militants since Israel’s military operation in Gaza began. Houthi militants, also allied with Iran, have continued their attacks on shipping through the Red Sea, a crucial trade artery, despite U.S. airstrikes.
The attacks have stoked worries that the U.S. and Iran are getting drawn into a regional conflict that could disrupt oil supplies.
Libya’s National Oil Corporation, meanwhile, resumed full production at the Sharara oilfield on Sunday after protests shut down output for two weeks. Sharara is one of Libya’s largest oilfields with capacity to pump 300,000 barrels per day.
Traders have generally been more focused on the supply and demand outlook than geopolitical risk.
The International Energy Agency has a bearish forecast for 2024, projecting that production outside OPEC, particularly in the U.S., will rise by about 1.5 million barrels per day, more than covering global demand growth of 1.2 million barrels per day.
OPEC, on the other hand, has presented a stronger outlook with oil demand forecast to grow by 2.2 million barrels per day, while production outside OPEC will grow by 1.3 million barrels per day.
“Investors want to be bullish but tepid data and cautious narrative from policymakers keep them on the backfoot,” Tamas Varga, an analyst with PVM Oil Associates, wrote in a note.
