Pedro Goncalves writes:
Oil prices climbed in early European trading as investors assessed the potential impact of Ukrainian drone attacks on Russian refineries, which could disrupt crude and fuel exports. At the same time, market participants are closely monitoring signs of growth in US fuel demand.
Brent crude (BZ=F) futures gained 0.5% to trade at $67.34 per barrel at the time of writing, while West Texas Intermediate (CL=F) futures rose 0.6% to $63.03 a barrel.
JPMorgan (JPM) analysts noted that the recent drone attack on the Primorsk oil terminal showed a growing willingness to target international oil markets. “The attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil (BZ=F, CL=F) prices,” the analysts wrote.
Primorsk, which can load approximately 1 million barrels per day (bpd) of crude, is a key export hub for Russian oil (BZ=F, CL=F) and the largest port in western Russia. The incident has raised concerns about potential disruptions to Russian oil exports.
“If we are seeing a strategic shift by Ukraine towards Russian oil exporting infrastructure, that brings upside risks to forecasts,” IG Markets analyst Tony Sycamore said, despite ongoing concerns around oversupply as OPEC+ plans to ramp up output.
Meanwhile, investors are also watching as US-China trade talks kicked off in Madrid on Sunday. The discussions are focused on Washington’s demand that its allies impose tariffs on Chinese imports linked to the country’s purchases of Russian oil (BZ=F, CL=F).
Adding complexity to the oil (BZ=F, CL=F) market’s outlook, recent data from the US showed softer job growth and rising inflation, which raised concerns about the state of the world’s largest economy and its oil demand.
