By Shariq Khan and Ahmad Ghaddar
NEW YORK/LONDON (Reuters) – Oil prices rose over 1% on Tuesday as markets weighed the possibility that Russian supplies may be disrupted by Ukrainian drone attacks on its ports and refineries, and awaited the Federal Reserve’s decision on U.S. interest rates.
Brent crude futures were up 83 cents, or 1.2%, at $68.27 a barrel at 11:04 a.m. ET (1504 GMT). U.S. West Texas Intermediate crude futures were up $1.03, or 1.6%, to $64.33 a barrel.
Russia’s oil pipeline monopoly Transneft has warned producers they may have to cut output following Ukraine’s drone attacks on critical export ports and refineries, three industry sources said.
Ukraine has intensified attacks on Russia’s energy infrastructure as talks to end their conflict have stalled.
“An attack on an export terminal like Primorsk is aimed more at limiting Russia’s ability to sell its oil abroad, affecting export markets,” said JP Morgan analysts.
“More importantly, the attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil prices,” they said.
Goldman Sachs estimates that the Ukrainian attacks have taken out about 300,000 barrels per day of Russian refining capacity in August and so far this month.
The situation in Russia warrants close monitoring as it could lead to more tightness in U.S. diesel markets, StoneX energy analyst Alex Hodes said.
“Should Russian refineries suffer substantial damage, it could increase demand for U.S. diesel exports and potentially sustain the inverted forward curve,” Hodes said.
U.S. diesel futures were last up 1.9%, outpacing both WTI oil and U.S. gasoline futures.
U.S. Treasury Secretary Scott Bessent on Monday said the government would not impose additional tariffs on Chinese goods to encourage China to halt purchases of Russian oil unless European countries hit China and India, the biggest buyers of Russian crude, with duties of their own.
Also on investors’ radar is the U.S. Federal Reserve’s September 16-17 meeting, at which the bank is widely expected to cut interest rates.
While lower borrowing costs typically boost fuel demand, analysts were cautious on the health of the overall U.S. economy.
Markets were also factoring in the likelihood of crude inventory declines in the U.S. last week, with official data expected on Wednesday at 1430 GMT.
A Reuters poll on Monday showed analysts expected U.S. crude oil and gasoline stockpiles to have fallen last week, while distillate inventories likely rose. [EIA/S]
(Repoting by Shariq Khan, Ahmad Ghaddar, Anjana Anil and Trixie Yap; Editing by Joe Bavier, Mark Potter and David Gregorio)
