Oil prices settled lower Tuesday as investors took a more mixed view toward the loss of Russian refinery capacity after recent Ukrainian attacks.
Front-month Brent crude futures due to expire on Thursday settled down 50 cents at $86.25 a barrel while U.S. West Texas Intermediate (WTI) crude futures settled down 33 cents, or 0.4 per cent, at $81.62.
The more actively traded Brent futures for June settled down 33 cents at $85.96.
Oil prices edged lower after Russia’s government ordered companies to cut output in the second quarter to meet a 9 million barrels per day (b/d) target to comply with pledges to the OPEC+ consumer group.
Russia, among the top three global oil producers and one of the largest exporters of oil products, is also contending with a spate of recent attacks on its oil refineries by Ukraine and has mounted its own attacks on Ukrainian energy infrastructure.
Russian oil refining capacity shut down by Ukrainian attacks has reached 14 per cent of the country’s total capacity, Reuters calculations showed on Tuesday.
“Gasoline is seeing the support of reduced availability to the global market from curtailed Russian exports that has filtered through to the U.S.,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
FGE analysts expect a structural decline in Russian refinery runs and do not see them regaining 2023 levels even in the second half of this year, they wrote in a note.
Trading was muted ahead of key data that could provide insight into when central banks may begin interest rate cuts, which often boost demand for oil.
The crucial February reading of the Personal Consumption Expenditures price index, the U.S. Federal Reserve’s preferred inflation gauge, is due on Friday, when markets are closed.
“The Fed promised these cuts but there’s really no guarantee that it will be delivered right away, so the market is trading tentatively,” said Frank Monkam, senior portfolio manager for Antimo LLC in Washington.
Meanwhile, a slightly weaker U.S. dollar offered some support to oil prices. A weaker dollar typically makes oil cheaper for oil buyers holding other currencies.
OPEC+ is unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters ahead of next week’s gathering of ministers that is not expected to make any policy recommendations.
Rising geopolitical premiums as the Israel-Gaza conflict continues were also set to sustain price levels. Iran-backed Houthi militants on Tuesday said they had mounted six attacks on ships in the Gulf of Aden and the Red Sea over the past 72 hours.
U.S. crude inventories are expected to fall by 1.3 million barrels, according to a Reuters poll. Official government data will be published Wednesday at 10:30 a.m. EDT.