Oil prices pushed higher on Wednesday as supply concerns in Russia and the U.S. added to market volatility. Investors are closely watching potential disruptions while awaiting clarity on sanctions, as the U.S. attempts to navigate negotiations to end the war in Ukraine.
Brent crude rose 0.8% to $76.44 per barrel, marking its third consecutive day of gains, while U.S. West Texas Intermediate for March climbed 0.9% to $72.48. The more active April contract also saw an increase, gaining 0.8% to $72.43. Analysts attribute the market’s movements to key geopolitical and supply-side factors, particularly uncertainty surrounding Russia, Iran, and OPEC. Speculation over whether sanctions on Russia could ease after U.S.-Russia talks in Riyadh remains, though analysts suggest it may be premature.
A key driver of oil price momentum is the recent wave of drone attacks on Russian energy infrastructure. A Ukrainian drone strike on a Caspian Pipeline Consortium (CPC) pumping station led to a 30-40% reduction in oil flows, translating to a loss of approximately 380,000 barrels per day. Meanwhile, harsh winter conditions in the U.S. are also weighing on supply, with North Dakota’s oil output potentially falling by 150,000 barrels per day.
Market analysts suggest that the psychologically significant $70 price level has held firm due to these disruptions. Additionally, there is growing speculation that OPEC+ may reconsider its planned production increase in April, with some experts predicting that the group will extend its output cuts instead.
Despite speculation about a potential U.S.-brokered peace deal between Russia and Ukraine, Goldman Sachs analysts believe that even if sanctions are eased, there will be little immediate impact on Russian oil exports. They argue that Russia’s production is primarily constrained by its OPEC+ commitments rather than the current sanctions.
Elsewhere, geopolitical developments in the Middle East may also influence oil prices. Israel and Hamas are set to begin indirect negotiations on a second phase of the Gaza ceasefire deal. A breakthrough could ease supply concerns, potentially stabilising oil prices in the short term.
Union Jack Oil plc (LON:UJO) is an oil and gas company with a focus on onshore production, development, exploration and investment opportunities within the United Kingdom and the United States of America hydrocarbon sector.
