NEW YORK: Oil prices jumped 5% to over US$121 (RM510) a barrel yesterday as disruptions to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies.
The situation adds to market worries about the ripple effect of heavy sanctions on Russia, the world's second-largest crude exporter, after its invasion of Ukraine.
The CPC pipeline is a significant supply line for global markets, carrying around 1.2 million barrels per day of Kazakhstan's main crude grade, or 1.2% of global demand.
Brent crude futures settled up US$6.12, or 5.3%, to US$121.60, while US West Texas Intermediate crude futures rose US$5.66, or 5.2%, to US$114.93 a barrel.
Oil benchmarks have been steadily rallying since Russia invaded Ukraine a month ago in what it calls a “special operation” and United States and its allies slapped heavy sanctions on that nation, disrupting worldwide oil trade.
Russia exports between 4 million and 5 million barrels of crude every day, making it the world's second-largest exporter behind Saudi Arabia. Analysts have varying estimates of how much oil will be unable to make it to market.
“There’s a growing consensus that the de facto ban on Russian oil purchases has resulted in a supply disruption of 2 to 3 million barrels a day, and until the world can figure out how to replace that oil we’re going to march on higher until demand destruction takes place,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Crude oil exports from Kazakhstan's CPC terminal on Russia’s Black Sea coast stopped fully yesterday 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.
US 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. Producers in the United States have been boosted drilling, but output has been slow to respond. – Reuters