DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved mixed in early trade Thursday, with both U.S. and international crude benchmarks stalling near 14-year highs as investors assess implications from the disruption of the Caspian Pipeline Consortium network on global supply balances, with the closure of the infrastructure threatening to remove up to 1 million bpd of crude oil from an increasingly tightening global oil market.

Kazakhstan Energy Minister Bulat Aqchulaqov said on Thursday that closure of the CPC pipeline could last up to six weeks due to ongoing repairs at the Novorossiysk export terminal that allegedly sustained extensive damages from storm-like conditions this week. The pipeline's capacity is estimated at 1.4 million bpd and accounts for two-thirds of Kazakhstan total oil exports, making it a vital artery for the country's economy. Organization of the Petroleum Exporting Countries pegged Kazakhstan oil production close to 2 million bpd at the start of the year after antigovernment protests briefly shuttered operations at the country's major oil fields of Tengiz and Kashagan.

The timing of the shutdown is curious considering European governments are in discussions this week over sanctioning Russian oil exports in response to Moscow's aggression in Ukraine. U.S. President Joe Biden landed in Brussels on Wednesday for an emergency summit among North Atlantic Treaty Organization that will address Russia's invasion of Ukraine.

As Russia continues its assault on Ukraine, millions of barrels of Russian oil are still finding a way to buyers despite the reluctance of U.S. and European companies to deal with Russian cargos, according to traders and analysts. Some suggest Russian oil exports "have gone underground" as the market adjusts to new risks in dealing with Russian oil.

So far, combined Russian exports of crude and products appear to be running at normal levels, with Baltic port activity at 1.55 million bpd and the Black Sea at 325,000 bpd. Much of this oil might be going into storage from where it could be resold to refiners, bypassing reputational risk and sanctions. Others suggest that Russian oil exports will collapse by 2 to 3 million bpd in coming weeks as Western companies shun any dealings with oil shipments from the sanctioned country.

Offsetting losses for the oil complex, Energy Information Administration said U.S. total oil and petroleum products stocks fell 6.7 million bbl in the week-ended March 18 to the lowest inventory level since November 2014 at 1.136 billion bbl. Included in the draw was a 2.5 million bbl decline in commercial crude oil inventories that now stand more than 13% below the five-year average. Domestic refiners increased run rate last week by a larger-than-expected margin to 91.1% of capacity, while processing 276,000 bpd more crude from the previous week.

In financial markets, overnight data of European Union showed business activity growth slowed in March as the economic impact from Russia's invasion of Ukraine offset a boost to demand from the further reopening of the economy following COVID-19 restrictions. The headline S&P Global Eurozone Composite PMI fell from 55.5 in February to 54.5 in March, according to preliminary estimates. The decline indicates some loss of economic growth momentum from February's five month high but still signals the second strongest expansion since November. The rate of expansion also remained above the survey's pre-pandemic average.

In Germany, the bloc's largest economy, the slowdown was led by the manufacturing sector where growth eased to the weakest rate since December amid reports of supply problems and weaker demand owing to the war in Ukraine.

Near 7:45 AM ET, NYMEX May West Texas Intermediate futures slipped $0.35 bbl to trade near $114.56 bbl, and ICE May Brent futures traded near $121.32 bbl, down $0.31. NYMEX April RBOB futures fell 2.33 cents to $3.4154 gallon, and April ULSD futures advanced 2.83 cents to $4.1431 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com