March 21, 2023

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Oil climbs 5% after Russia warns of prolonged pipeline outage

Oil climbs 5% after Russia warns of prolonged pipeline outage

The news of the interruption helped Pushing oil prices in the US It rose 5.2% to settle at $114.93 a barrel. Brent crude, the global benchmark, jumped 5.3 percent to $121.60 a barrel.
The Caspian Sea Pipelines Consortium, a system that transports oil from western Kazakhstan and Russian oil producers to the Black Sea, said in statment On Tuesday, an inspection revealed damage to a marine station. The group said some operations were temporarily suspended for repairs.
Russian energy official, This was reported by the Russian state news agency TASSOn Tuesday, he said repairing the sea port near the Black Sea port of Novorossiysk could take six weeks to two months and could shrink oil exports by about 1 million barrels per day.

“This is a rather dangerous timetable,” Russian Deputy Energy Minister Pavel Sorokin was quoted as saying by TASS. He added that a severe storm had damaged at least one of the three oil loading facilities and that assessments were underway.

Russian government and chevron Their own stake in the Caspian Sea Pipeline Consortiumwhich transports oil from landlocked Kazakhstan.

Chevron said in a statement that it was “currently assessing the situation” and directed further inquiries to the pipeline consortium.

“This is a huge supply shock,” said Ryan Fitzmaurice, energy analyst at Rabobank.

Rise “dangerous”

The disruption of the Caspian Sea adds to concerns about oil supplies from the region in the wake of the Russian invasion of Ukraine and Western sanctions on Moscow. These sanctions made the energy, shipping and financial industries Nervous about handling Russian barrels.

“I’ve become increasingly optimistic on the supply side — very dangerously,” Fitzmaurice said.

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Energy markets are on the brink. Brent crude is up 24% since closing at $98.02 a barrel on March 16, although it is still shy of the recent peak of around $139 a barrel recorded earlier this month.

The disruption comes at a time when the Russian economy is in severe turmoil and the invasion of Ukraine is making little progress. Analysts had previously warned that Russia can arm oil by deliberately holding back supplies in an attempt to punish the West.

“The timing is interesting, to say the least,” Fitzmaurice said.

In a speech on Wednesday, US Energy Secretary Jennifer Granholm noted the disruption of the Caspian Sea pipeline and used it to reiterate her recent calls for increased domestic production of fossil fuels.

“What does this tell us about our role in creating a secure energy future that is free from being controlled by Putin or any state that conflicts with our interests?” Granholm said at an event for the International Energy Agency in Paris. “For our part, we have sent a clear message to our local oil and gas companies. We want this industry to increase production wherever and whenever they can, for now.”

After the Russian invasion of Ukraine, chevron (CVX) It was noted during a March 1 call with reporters that its only real exposure to Russia is through the Caspian pipeline system. Chevron CEO Mike Wirth expressed confidence at the time that oil would continue to flow through the critical artery.

“We have no indications from any government that the operations of the Caspian Sea Pipeline Consortium may stop,” Wirth said.

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CNN’s Chris Liakos contributed to this report.