By Shadia Nasralla and David Gaffen LONDON/NEW YORK (Reuters) -Oil prices jumped 5% to over $121 a barrel on Wednesday as a weather-related disruption to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies. Brent crude futures were up $5.95, or 5.1%, at $121.43 a […]
By Shadia Nasralla and David Gaffen
LONDON/NEW YORK (Reuters) -Oil prices jumped 5% to over $121 a barrel on Wednesday as a weather-related disruption to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies.
Brent crude futures were up $5.95, or 5.1%, at $121.43 a barrel as of 12:01 p.m. EDT (1501 GMT). U.S. West Texas Intermediate (WTI) crude futures rose $5.24, or 4.8%, to $114.51 a barrel.
The CPC pipeline has been in the spotlight as the market is on edge over the ripple effect of heavy sanctions on Russia, the world’s second-largest crude exporter, after its invasion of Ukraine, which Moscow calls a “special military operation.”
Crude oil exports from Kazakhstan’s CPC terminal on Russia’s Black Sea coast stopped fully on Wednesday after damage caused by a major storm and continued bad weather, a port ship agent and the head of CPC said.
Russian Deputy Prime Minister Alexander Novak later said that oil supplies by the CPC may be completely stopped for up to two months.
The CPC pipeline carries around 1.2 million barrels per day of Kazakhstan’s main crude grade, which accounts for 1.2% of global demand.
“Prices are primarily rising on the loss of CPC Blend crude exports out of Novorossiisk …. adding further bullish fuel to the fire as the drop in Russian crude exports finally appears underway,” said Matt Smith, lead oil analyst for the Americas at Kpler.
U.S. President Joe Biden is set to announce more Russian sanctions when he meets with European leaders on Thursday in Brussels, including an emergency meeting of NATO. Russia refers to the invasion, which is now a month old, as a “special operation.”
European Union member countries remain split on whether to ban imports of Russian crude and oil products, but this might change once short-term contracts run out.
“You’ll know at the end of April what the total loss of Russian oil is,” said Trafigura’s Ben Luckock, at the FT Commodities Global Summit. He said it was possible that oil could reach $200 a barrel.
Plunging crude stockpiles in the United States, the world’s biggest oil consumer, added to the apprehension around supply.
U.S. crude stocks fell 2.5 million barrels last week, government data showed, compared with expectations for a modest increase. Crude production remained flat at 11.6 million barrels per day for the seventh straight week. [EIA/S]
Evidence of concern about supply can be seen in the market structure, where front-month prices are trading at a heavy premium to following months, as buyers scramble to secure supplies.
“I think you will see record backwardation and you will see $150 a barrel this summer,” Luckock said.
The one bit of supportive news from the report was the second straight weekly increase in inventories at the Cushing, Oklahoma, delivery point for U.S. crude futures contracts, where stocks rose by 1.2 million barrels.
(Additional reporting by Sonali Paul and Mohi NarayanEditing by Marguerita Choy and Mark Potter)
