NEW YORK: Oil prices jumped 5 percent to over $121 a barrel on Wednesday as disruptions to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies.
Brent crude futures were up $4.83, or 4.2 percent, at $120.30 a barrel as of 1:55 p.m. EDT (1755 GMT). US West Texas Intermediate crude futures rose $4.39, or 4 percent, to $113.70 a barrel.
Crude oil exports from Kazakhstan’s CPC terminal on Russia’s Black Sea coast stopped fully on Wednesday after damage caused by a major storm and continued bad weather, a port ship agent and the head of CPC said.
Russian Deputy Prime Minister Alexander Novak later said that oil supplies by the CPC may be completely stopped for up to two months.
The CPC pipeline carries around 1.2 million barrels per day of Kazakhstan’s main crude grade, which accounts for 1.2 percent of global demand.
The situation adds to market worries about the ripple effect of heavy sanctions on Russia, the world’s second-largest crude exporter, after its invasion of Ukraine.
“Prices are primarily rising on the loss of CPC Blend crude exports out of Novorossiisk …. adding further bullish fuel to the fire as the drop in Russian crude exports finally appears underway,” said Matt Smith, lead oil analyst for the Americas at Kpler.
US President Joe Biden is set to announce more Russian sanctions when he meets European leaders on Thursday in Brussels, including an emergency meeting of NATO.
EU member countries remain split on whether to ban imports of Russian crude and oil products, but this might change once short-term contracts run out.
“There’s a growing consensus that the de facto ban on Russian oil purchases has resulted in a supply disruption of 2 to 3 million barrels a day, and until the world can figure out how to replace that oil we’re going to march on higher until demand destruction takes place,” said Andrew Lipow, president of Lipow Oil Associates in Houston.