The two major crude oil grades appreciated on Monday as investors assessed the impact of Ukrainian drone attacks on Russian refineries and of US President Donald Trump pressing countries to halt Russian oil purchases.
Brent crude futures gained 45 cents or 0.67 per cent to trade at $67.44 a barrel and the US West Texas Intermediate crude futures improved by 61 cents or 0.97 per cent to sell at $63.30 a barrel.
One of Russia’s largest oil refineries, in the northwestern town of Kirishi, has halted a key processing unit following a Ukrainian drone attack over the weekend.
Ukraine has intensified attacks on Russian energy infrastructure in an attempt to inflict damage on its war efforts as talks to end the conflict between the two countries have stalled.
Last week, Ukraine stepped up attacks on Russian oil infrastructure, including the largest oil exporting terminal, Primorsk. Primorsk has a capacity to load about 1 million barrels per day of crude, while the Kirishi refinery processes about 355,000 barrels per day of Russian crude, equal to 6.4 per cent of the country’s total.
The escalation marks Ukraine’s deepest penetration into Russia’s energy network, hitting not only sanctioned “shadow fleet” tankers but also refining units critical to domestic supply.
Analysts warn that if Ukraine sustains this tempo, Russia’s export flows from Primorsk and Ust-Luga could face prolonged capacity constraints.
Pressure from President Trump on buyers of Russian crude also boosted oil prices on Monday as he noted over the weekend that the US was prepared to impose fresh energy sanctions on Russia, but only if all NATO nations ceased purchasing Russian oil and implemented similar measures.
This is as the American President has struggled to bring to a close the Russia-Ukraine conflict despite repeated threats of harsher penalties on Russia and its partners.
Support also came from solid refinery demand in China last month and an expected decline in US crude inventories last week, while weaker economic data from China weighed on prices.
Investors are awaiting the interest rate decision by the US Federal Reserve at its September 16-17 meeting, at which the bank is expected to ease monetary policy by 25 or 50 basis points. Lower borrowing costs could boost fuel demand.
Prices also found support as the US Dollar dropped against its peers on Monday, encouraging crude demand as a weaker Dollar makes oil less expensive for holders of other currencies.