Concerns Over Ukraine Drone Strike Send Oil Prices Upward

Meanwhile, the Saudi export more and produce less crude: File Image/Pixabay

The sentiment-based roller coaster of crude trading patterns took a sudden upward trajectory on Monday, with a resumption of fears about global tightness following a drone strike on a Russia fuel terminal.

The strike, delivered by Ukraine and knocking out the Ust-Luga facility on the Baltic Sea (which exports 1.35 million barrels per day (bpd) of crude and related products), was augmented by worries stemming from a 20 percent reduction in oil output in North Dakota due to severe cold weather.

Brent settled up $1.50 at $80.06 per barrel, up $1.50, and West Texas Intermediate for February delivery settled up $1.78 at $75.19 per barrel (the more active March contract climbed $1.36 at $74.61).

Bob Yawger, managing director and energy futures strategist at Mizuho Americas, explained the significance of the Ukraine strike by stating that the attack "raises the question: is this going to be a policy decision by Ukrainians to attack Russian oil infrastructure? If that's the case, that's a problem."

John Kilduff, founding partner at Again Capital, agreed: "It's a pretty significant terminal they hit and if they continue to try to target Russian oil infrastructure that would be a game changer, and that's what the market is pricing in here."

But theoretically balancing the concerns, at least to a degree, was news that Libya's National Oil Corporation resumed full production at the Sharara oilfield, which can pump 300,000 bpd and was suspended for two weeks due to protests.

Meanwhile in Saudi Arabia, crude exports reportedly reached a five month high in November, rising by 39,000 bpd to around 6.34 million and up from 6.3 million bpd in October; however, production in November fell by 122,000 bpd to 8.82 million bpd, the lowest level in 2023, as the Saudis abided by their voluntary production cuts under the Organization of the Petroleum Exporting Countries (OPEC).