Crude oil prices for front-month contracts rose on Monday, with the main oil benchmark for North America, West Texas Intermediate, reaching its highest level since late October 2023. The upward movement of oil prices appeared to be propelled by stronger-than-expected manufacturing activity in the United States which seemingly brightened the demand outlook at the start of the second quarter. The ongoing turmoil in the Middle East and Ukraine further exerted pressure on crude prices. West Texas Intermediate (WTI) for May delivery rose 0.90% to sell at $84.03 per barrel at 11:02 am ET. Brent for June settlement was up 0.63% to $87.63 a barrel at the same time. NN: You got to love the golden cross
DTEK, Ukraine’s largest private energy provider, reported on Saturday significant damages to its infrastructure due to Russian missile and drone attacks,
According to the head of the firm, Dmytro Sakharuk, five of its six plants were damaged or destroyed, resulting in the loss of 80% of its generating capacity, with repairs potentially taking up to 18 months.
President Volodymyr Zelensky condemned the attacks in his nightly address, describing them as “vile strikes” aimed at debilitating Ukraine’s energy capabilities.
Ukrainian President Volodymyr Zelensky said in an interview with The Washington Post published on Friday that his country’s forces would have to begin to retreat in its war against Russia unless the United States provides Kiev with more weapons and other military aid. “If there is no US support, it means that we have no air defense, no Patriot missiles, no jammers for electronic warfare, no 155-milimeter artillery rounds,” Zelensky claimed. “It means we will go back, retreat, step by step, in small steps,” he added. The Ukrainian president insisted his country’s troops are “trying to find some way not to retreat” and that the military’s “smart steps” after Russia’s takeover of Avdiivka helped stabilize the situation for the time being. Still he insisted Ukraine must take steps to launch a counteroffensive because if it doesn’t, “Russia will do it.”
Russia destroys Ukrainian ammo depot in Dnieper direction
The Russian Defense Ministry said on Saturday that the Russian military destroyed a Ukrainian ammunition depot on the right bank of the Dnieper River. The troops also destroyed Ukrainian camouflaged firing positions, the ministry said. The Russian forces used kamikaze drones to attack Ukrainian soldiers in trenches, the ministry added. It did not provide an estimate of damage and casualties.
Power outages hit Odessa region
Emergency power outages were observed in Odessa and its surrounding region due to damages sustained by an energy facility, as reported by energy utility company Ukrenergo on Sunday. The disruption resulted in emergency shutdowns in Odessa and nearby areas due to equipment damage, with potential for increased shutdowns as consumption rises. Last night, an air raid alert was issued across Ukraine, including Odessa, and this morning, Natalya Gumenyuk, the official representative of the operational command “South” of the Armed Forces of Ukraine, confirmed damage to the energy facility area.
NN: Ukraine is running out of ammo and becoming more desperate by the day. And desperate people do desperate things. Like bombing Russian oil export terminals on the Baltic and Black sea. I am sure $5.00 gasoline will get Biden get reelection attention.
Hamas stressed on Saturday that successful indirect ceasefire negotiations depend on four conditions. The Palestinian group said
Israel must stop all hostilities,
2. Withdraw from Gaza,
3. Allow displaced Palestinians to return to their homes,
4. Let humanitarian aid enter the enclave.
Ceasefire talks have made little progress in the months after the previous pause in the conflict in late November 2023. Negotiations are led by mediators such as Qatar and Egypt and were recently described as “stuck.”
Russian Deputy Prime Minister Alexander Novak announced on Friday that Russia will be implementing oil production cuts in the second quarter of 2024 to align with the rest of the OPEC+ member countries. According to Novak, Russia will reduce oil production and exports gradually. In April, production will be reduced by an additional 350,000 barrels per day (bpd) and exports will decrease by 121,000 bpd. In May, production will see a decline of 400,000 bpd with exports cut by 71,000 bpd. By June, production will be reduced by approximately 471,000 bpd. The oil companies will adjust their production levels based on their share of the country’s total oil output. Novak emphasized that these measures aim to ensure a fair contribution from all countries towards the reduction of production and market stabilization.
Novak rules out complete diesel export ban for now
Russian Deputy Prime Minister Alexander Novak (pictured) ruled out the implementation of a complete prohibition on the export of diesel fuel from Russia, stating that the country produces sufficient quantities, Ria reported on Friday. “No, we produce diesel in sufficient volume, twice as much as is required to supply the domestic market, so there is simply nowhere to put it,” he said when asked about the necessity of imposing an export ban on diesel fuel. As a result of market saturation, the aforementioned ban was lifted in late November. In an effort to maintain stability in the domestic market, the Russian government recently imposed a prohibition on the export of gasoline from the country between March 1 and August 31.
Russia has targeted Ukranian energy facilities in an overnight attack with long-range precision weapons, Russia’s Defense Ministry said on Friday. “Last night, the Russian Armed Forces delivered a combined strike by air-launched, seaborne and ground-based long-range precision weapons, including Kinzhal aero-ballistic hypersonic missiles, and also by unmanned aerial vehicles against energy facilities and air defense sites of the Ukrainian army. The goals of the strike were achieved. All the targets were struck,” The ministry said. Ukraine’s largest power provider, DTEK, said that three of its thermal power stations were targeted in the overnight attacks. According to the Ukrainian military, the attack included dozens of missiles and at least 60 explosive drones—all aimed at energy infrastructure. Ukraine said that 84 of 99 missiles were shot down, but the late-night attacks did manage to damage Ukraine’s energy assets in six separate regions, some of which triggered emergency shutdowns. The Russian attacks on Ukraine’s energy infrastructure come after Ukraine stepped up its drone attacks on Russian refineries in recent weeks, reducing Russia’s overall refinery capacity and cutting into Russia’s refinery output, including gasoline and diesel production for its own domestic market. The United States had urged Ukraine to stop its attacks on Russia’s refineries on concerns that any Russian retaliation could result in a spike in crude oil prices. Rising crude oil prices, which lead to higher gasoline prices, are problematic for sitting U.S. presidents in election years. Earlier this week, Russia attacked an underground natural gas storage site in Ukraine, but the attack did not disrupt supply.
Ukrainian power plants damaged by Russian assault
Thermal and hydroelectric power plants in central and western Ukraine were damaged by a Russian overnight assault, Ukrenergo, the country’s electricity transmission system operator reported in a post on Telegram on Friday. “During the combined attack, energy facilities were hit again. Thermal and hydroelectric power plants in the central and western regions were damaged,” the report stated. DTEK Holdings Limited, Ukraine’s largest private energy firm, shared that its equipment was “seriously” damaged in the attack. According to the company’s statement, one engineer was injured. Earlier, Russian forces launched an assault aimed at infrastructure sites near the central Ukrainian city of Dnipro.
U.S. benchmark crude gained over $2 on Thursday as U.S. crude inventories tightened and OPEC+ vowed to keep the output cut status quo as tensions continued to flare in the Middle East and Russia-Ukraine. At 4:23 p.m. ET on Thursday, U.S. crude benchmark West Texas Intermediate (WTI) trading up 2.05% at $83.02, while global benchmark Brent crude was trading up 1.61% at $87.48. WTI has gained 14% so far this year. This week’s inventory data from the Energy Information Administration (EIA) showed a U.S. crude oil stockpile build of 3.2 million barrels, compared to the previous week’s draw of 2 million barrels. In both cases, the data showed a draw in gasoline inventories, helping to support oil prices. That data, released on Wednesday, put downward pressure on oil prices initially. However, after some time to digest the data, which analysts said was a smaller increase than anticipated for this time of year, prices shifted into rally mode. “We … expect U.S. inventories to rise less than normal in reflection of a global oil market in a slight deficit,” Reuters quoted SEB analyst Bjarne Schieldrop as saying. “This will likely hand support to the Brent crude oil price going forward.” Also putting upwards pressure on oil prices is the continued intensification of the Russia-Ukraine conflict, which has focused most recently on energy infrastructure. A Ukrainian drone attack last week on a Russian refinery operated by state-run Rosneft has resulted in a production shutdown after damage to the refinery’s crude processing capacity.
Ukraine has stepped up attacks on oil refineries in Russia in recent weeks, which have reduced Russian refining capacity, and which, reportedly, have the White House concerned about rising international prices. Ukrainian drone attacks on Russian refineries in recent weeks have taken out as much as 600,000 barrels in daily processing capacity in Russia.
On Thursday, JP Morgan suggested that oil prices could rise further, pointing to Russia’s decision to impose additional curbs on production.“ Russia’s actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September,” they wrote in a note, as quoted by Investing.com. OPEC is meeting again next week and expectations are that it will leave its production policy unchanged.
Russian warships from the Pacific Fleet have crossed the Bab-el-Mandeb Strait and entered the Red Sea, the state-run Tass news agency said, venturing into a maritime region plagued by Houthi attacks and crowded with naval vessels. The detachment included the missile cruiser Varyag and frigate Marshal Shaposhnikov, Tass reported Thursday, citing the Russian Pacific Fleet’s press service, which said the ships were carrying out “assigned tasks within the framework of the long-range sea campaign.” The ultimate destination of the ships was unclear from the report, as was the reason Russia sent vessels to the area.
For months, the Yemen-based Houthis have carried out a series of attacks on vessels in the Red Sea in retaliation for Israel’s military actions in Gaza, forcing many ships to redirect their journeys. The group told China and Russia earlier this month that their ships can sail through the Red Sea and Gulf of Aden without being attacked. In exchange, the two countries may provide political support to the Houthis in bodies such as the United Nations Security Council, according to several people with knowledge of the militant group’s discussions.
Source: Bloomberg
The Houthis, an Islamist group, say they’re targeting ships linked to Israel, the US and UK. Yet, they appear to have mis-identified some vessels. Missiles exploded near a ship hauling Russian oil near Yemen in late January. It happened days after a spokesman for the Houthis told a Russian newspaper that Russian and Chinese merchant ships needn’t fear attacks. The Houthis also fired a missile at Chinese-owned oil tanker Huang Pu on Saturday, US Central Command said, highlighting continued risks to shipping in the seas off Yemen despite the agreement. Since the attacks started, most Western shipping firms have avoided the strait and are instead going around southern Africa. However, US and UK warships in the Red Sea have been hitting Houthi targets in Yemen for weeks in an attempt to deter the militant group from attacks on merchant vessels, while Iran, which supports the Houthis, has a spy ship just outside the Red Sea. A French ship is also nearby. Earlier this month, Iran, Russia and China held joint naval exercises in the Indian Ocean, according to Russia’s Defense Ministry. Both the Varyag and Marshal Shaposhnikov took part in the drills, which Russia said were meant to practice “safety in maritime economic activities,” including liberating ships hijacked by pirates. Russia has also sought a naval base on the Red Sea in Sudan, though a civil conflict in that country may put back those plans. NN: Everyone is coming to the party.
A refinery in southwestern Russia owned and operated by state oil giant Rosneft has been taken offline and all production stopped, due to damage following a drone attack from Ukraine last week, Reuters reported on Thursday, quoting sources in the industry. Rosneft’s Kuibyshev oil refinery in the region of Samara on the Volga River was hit by a drone attack this weekend and had already halted half of its crude processing capacity after one of the two primary crude refining units at the facility caught fire. Ukraine has stepped up attacks on oil refineries in Russia in recent weeks, which have reduced Russian refining capacity, and which, reportedly, have the White House concerned about rising international prices. The United States has repeatedly urged Ukraine to halt its drone attacks on Russian oil refineries due to Washington’s assessment that the strikes could lead to Russian retaliation and push up global oil prices, the Financial Times reported last week, citing sources familiar with the exchange. Ukrainian drone attacks on Russian refineries in recent weeks have taken out as much as 600,000 barrels in daily processing capacity in Russia, according to commodity trading major Gunvor. “It is significant because obviously this is gonna hit the distillate exports straight away,” Gunvor chief executive Torbjörn Törnqvist told Bloomberg on the sidelines of the CERAWeek conference in Houston last week. “So that will probably take down exports by a couple of hundred thousand barrels, so to me, it’s a distillate problem,” the executive added.
According to Reuters estimates, the amount of Russian oil refining capacity that has been taken offline due to Ukrainian drone strikes is 14% of Russia’s total refining capacity.
Calculations show that 900,000 barrels per day of refining capacity have been taken offline by drone strikes, Reuters reported on Tuesday. This includes Lukoil’s Norsi and Volgograd refineries, and Rosneft’s Kuibyshev and Ryazan refineries, among others.
The latest crude oil purchase that the Department of Energy made as part of refill plans for the strategic petroleum reserve cost an average of over $81 per barrel, exceeding the $79 ceiling set by the federal government. Per an Argus report, the DoE declined to comment on why it had bought the oil despite the higher price hinting at more news to come later today. Back in 2022, to arrest an inexorable climb in retail fuel prices, the White House announced a release of 180 million barrels of crude oil from the strategic petroleum reserve. Critics warned the move would have a limited effect on prices but compromise the energy security of the country by reducing the level of crude in the SPR. The final amount of oil released from the SPR ended up exceeding 180 million barrels with the DoE pledging to replenish the reserve in a timely fashion but only when prices were favorable. The SPR is currently close to a 40-year low as a result of the massive release. The replenishing effort has been going on slowly, with three million barrels bought there and another three bought here as the very news of a planned purchase led to an uptick in prices. This forced the department to update the price range, at which it would be buying, raising the top end from $72 per barrel last year to $79 per barrel. Yet oil prices have been on a climb recently and WTI broke the $80-yer-barrel threshold earlier this month. As of March 22, the SPR stood at 363 million barrels of crude, Argus reported, citing Energy Secretary Jennifer Granholm as saying that it should be back to normal by the end of the year. This, however, will not be a result of the replenishment effort but of the cancellation of 140 million barrels in previously planned SPR sales for the period to 2031. NN: Typical government deal sell the oil at $70 buy it back over $83.
