Oil trades steady as Ukraine peace talks counter supply disruptions

NEW YORK: Oil prices held firm on Tuesday as the US and Russia pressed ahead with talks to end the war in Ukraine, while traders assessed fallout from drone attacks on a key conduit for Kazakhstan’s oil exports.

Brent crude futures rose 4 cents to $75.26 a barrel by 10:53 a.m. EST. US West Texas Intermediate crude futures were up 48 cents, or 0.7%, to $71.22 a barrel, catching up with the gains Brent registered on Monday, when the US contract traded without settlement due to a holiday.

Brent rose 48 cents in the previous session after Ukrainian drones attacked a pumping station in Russia on the Caspian Pipeline Consortium pipeline, which moves crude from Kazakhstan to world markets.

Kazakhstan’s oil exports could decline by 30% for up to two months due to the drone attacks, which caused “serious damage,” Transneft said. That would equate to reducing global oil supply by as much as 380,000 barrels per day, per Reuters calculations.

“Brent already benefited yesterday from the CPC supply disruptions, but generally it will come down to how long and how big the disruption is,” UBS analyst Giovanni Staunovo said.

US and Russian delegates held a 4-1/2-hour meeting in Saudi Arabia to discuss ways to halt the deadliest conflict in Europe since World War II. Ukraine was not represented and Russia hardened its demands.

If a deal is reached, Washington and its allies could abandon sanctions on Russian oil supplies.

“Everyone is waiting on what is going to happen with Russia and Ukraine,” Mizuho oil analyst Robert Yawger said. “That’s not something that’s going to happen in the next 15 minutes, so the market is going to stay cautious,” he added.

In a potential boost for oil prices in upcoming sessions, US inventories and trade data due on Thursday could show lower net-imports for crude oil last week, Staunovo said.

However, expectations of a heavy refinery maintenance season could weigh on crude oil demand in the weeks ahead.

“There is plenty of crude out here on the offer with refinery turnarounds beginning in March seen as heavy,” United ICAP Energy Specialist Scott Shelton told clients in a note on Tuesday.

Traders are also waiting for clarity on whether OPEC+ will proceed with plans to boost oil supply from April, or delay that to a later date.

Given that oil prices have dropped sharply in recent weeks - Brent traded over $80 a barrel in mid-January - more OPEC+ supply going into April will weigh heavily on the market, Mizuho’s Yawger said.