Oil Prices Surge 1.8% on Russian Supply Threats

Oil prices experienced a rebound on Tuesday, ending a four-day decline as traders evaluated the escalating threats to Russian oil supply. These threats range from Ukrainian attacks on Russian energy infrastructure to potential bans on diesel exports. The West Texas Intermediate (WTI) crude oil price surged by 1.8%, closing near 63 dollars per barrel, marking the largest single-day gain since early September. This price increase follows a series of drone attacks by Ukraine on Russian refineries, prompting the Russian government to consider implementing diesel export restrictions on certain companies.

The potential diesel export ban could lead to a temporary increase in Russian oil exports as refineries reduce their output. However, this situation is expected to be short-lived. The near-month price spread for WTI, which is the difference between the nearest two contracts, closed at its strongest level in about two weeks. This reflects growing concerns about the tightening global supply outlook.

One factor limiting the upward momentum is the potential resumption of exports from Iraq through the Kurdish region. This could reintroduce approximately 230,000 barrels of oil per day to the international market, offsetting some of the supply disruptions caused by the threats to Russian oil exports. The rise in oil prices comes as traders weigh the potential impact of geopolitical tensions on global energy supplies. The situation in Ukraine continues to be a significant factor influencing oil markets, with the possibility of further disruptions to Russian energy exports adding to the uncertainty.