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Oil prices rose on Wednesday, supported by supply concerns stemming from a Ukrainian drone attack on a Russian oil facility, cold weather disruptions in the U.S., and OPEC+ speculation regarding output levels.
- Brent crude futures climbed 0.5% to $76.25 per barrel at 07:20 GMT.
- West Texas Intermediate (WTI) crude for March gained 0.6% to $72.29 per barrel, while the April contract rose 0.6% to $72.25 per barrel.
- Prices are on track for a third consecutive session of gains.
Key Factors Driving Oil Prices
1. Russian Supply Disruptions
- A Ukrainian drone attack on a Russian oil pumping station disrupted crude flows through the Caspian Pipeline Consortium (CPC).
- Russia confirmed that oil flows were reduced by 30%-40%, translating to a loss of up to 380,000 barrels per day (bpd).
- The CPC pipeline is a key export route for Kazakhstan’s crude, increasing concerns over broader supply constraints.
2. Cold Weather Disrupting U.S. Oil Production
- Freezing temperatures in the U.S. Midwest are threatening oil output, particularly in North Dakota—the country’s third-largest oil-producing state.
- The North Dakota Pipeline Authority estimated that production could fall by as much as 150,000 bpd due to harsh weather conditions.
3. OPEC+ Supply Policy Uncertainty
- Markets are speculating that OPEC+ may reconsider its planned April supply increase in response to geopolitical tensions and market volatility.
- Any delay in planned production increases could provide further support for oil prices in the coming weeks.
Market Outlook
- Psychologically, the $70 per barrel level for WTI has held firm, driven by supply concerns.
- The market is also closely monitoring Ukraine-Russia tensions, which could further impact global oil flows.
- Investors await further clarity on OPEC+ strategy, with a decision on output adjustments potentially influencing crude price trends.
In the near term, supply constraints and geopolitical risks could continue to support oil prices, though macroeconomic factors like interest rate policies and global demand trends will also play a role in price direction.
