Oil Prices Rise Following Ukrainian Drone Strikes on Key Russian Baltic Facilities

Oil prices have continued to rise due to worries that increasing Ukrainian drone attacks could disrupt the crude flow through Russia’s main export hubs along the Baltic Sea.

Brent crude has surged past $67 per barrel, bouncing back from a 1.7% drop on Thursday. Sources indicate that the strikes have halted activities at Primorsk— the crucial oil-loading port in the region— and disrupted three pumping stations that convey crude to the Ust-Luga hub.

The heightened risk premium has overshadowed an International Energy Agency forecast predicting a record surplus in oil supply for the upcoming year. This follows a more somber report from the agency on Thursday, coinciding with OPEC+’s plan to gradually reintroduce previously idle barrels into the market in October, albeit at a more measured pace than earlier increases.

The oil market is navigating a “tug-of-war” between bearish fundamentals and escalating geopolitical tensions, as highlighted by Citigroup Inc. this week, which still forecasts Brent prices dipping into the low $60s by year’s end.

At present, Brent is caught within a price range of $65 to $70 per barrel, a pattern that has been ongoing since early August.

“The volatility reflects the market’s continued challenge to reconcile the risks of a growing surplus with sustained geopolitical uncertainties and strong refined product margins,” stated Ole Hvalbye, a commodities analyst at SEB AB. “Overall sentiment remains cautious.”

Prices:
Brent for November delivery rose 2% to $67.69 a barrel as of 1:04 p.m. in London WTI for October delivery climbed 1.2% to $63.48 a barrel.

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