Oil prices climb as attacks on Russian energy facilities intensify

[March 18, 2024]  By Natalie Grover

LONDON (Reuters) -Oil benchmark Brent hovered just under the $86 a barrel mark on Monday, extending last week's gains, as Ukraine increased its attacks on Russian energy infrastructure.

Brent crude oil futures for May delivery were up 62 cents, or 0.7%, at $85.96 a barrel by 1019 GMT.

The April contract for U.S. West Texas Intermediate (WTI) crude was up 70 cents, or 0.9%, at $81.74, in slow trade with the contract set to expire in the coming days. The more active May delivery contract traded up 71 cents, or 0.9%, at $81.29.

"The strikes on Russian refineries added $2-$3 per barrel of risk premium to crude last week, which remains in place as we start this week with more attacks over the weekend," said Vandana Hari, founder of oil market analysis provider Vanda Insights.

On Saturday, one of the strikes sparked a brief fire at the Slavyansk refinery in Kasnodar, which processes about 170,000 barrels of crude oil per day.

A Reuters analysis found the attacks have idled around 7% of Russian refining capacity in the first quarter. The refining complexes process and export crude varieties to several markets including China and India.

The main focus this week is on potential changes to the fate of monetary policy in major economies, with many central banks having held on to high interest rates over a protracted period to quell sticky inflation.

The outcome of the U.S. Federal Reserve's two-day meeting that ends on Wednesday should bring clarity on the timing of interest rate cuts, said Tony Sycamore, a market analyst with IG.

An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

The Fed will likely keep rates unchanged this month, while the possibility of an interest rate cut at the June meeting "is now a coin flip," Sycamore said.

Lower interest rates would stimulate demand in the U.S., the world's biggest oil consumer, supporting oil prices.

Both oil contracts posted gains last week, with prices hitting their highest level since November, buoyed in part after the International Energy Agency strengthened its 2024 demand outlook for the fourth time since November.

Meanwhile, in the Middle East, Israeli Prime Minister Benjamin Netanyahu said on Sunday he would keep on with the military campaign against Hamas in Gaza, while ceasefire talks were set to resume.

The ceasefire talks "keep a guessing game going on with subtexts of quotes only adding to exasperation rather than anything that might influence oil prices," said John Evans of oil broker PVM.

(Reporting by Natalie Grover, Mohi Narayan and Colleen Howe; Editing by Jamie Freed, Muralikumar Anantharaman and David Evans)

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