DTN Oil

WASHINGTON, D.C. (DTN) -- West Texas Intermediate (WTI) futures on the New York Mercantile Exchange (NYMEX) and Brent crude traded on the Intercontinental Exchange advanced more than 2% at the start of a new trading week in reaction to a suspected drone attack on the Russian fuel port in the Gulf of Finland, affecting crude and petroleum products flows to Asia.

Commercial Sea Port Ust-Luga, located about 120 miles west of St. Petersburg, is a multifunctional port designed for transshipment of all types of cargo, oil and petroleum products for international markets, and has both universal and specialized terminals. Per annual turnover, Ust-Luga is one of the five largest cargo ports in Europe. Together with a vast shipping capacity, the facility is home to a large refining complex.

In 2022, Ust-Luga processed almost 7 million metric tons (mmt) of stable gas into end products, including 4.2 mmt of light and heavy naphtha, 1 mmt of jet fuel and 1.5 mmt of fuel oil and gas oil. Most of the petroleum products refined at the facility are shipped to Asia, namely China, Singapore and Malaysia, while jet fuel is delivered to Istanbul for Turkish Airlines.

According to a statement from Novatek, the company that operates the fuel terminal, the attack is a result of an "external influence." Novatek did not provide a clear timeline for the restart of the Baltic terminal.

Both Ukrainian and Russian media outlets said the attack was the result of a special operation by the Ukrainian security forces.

If confirmed, Sunday's attack would become the third in a series of Ukrainian drone strikes on Russian energy infrastructure following an assault on an oil terminal in St. Petersburg and a strike on a storage facility in the western Bryansk region. Four oil reservoirs with a total capacity of 1.6 million gallons were set ablaze when the drone reached Klintsy, a city of some 70,000 people located about 40 miles from the Ukrainian border.

Intensifying attacks on Russian energy infrastructure in recent weeks have clearly made traders nervous over a deeper disruption to the Russian oil flows. Combined with tensions in the Red Sea and shipping restrictions through the Panama Canal, the attacks on Russian energy facilities could further spike commodity prices and underlying inflation across developed economies that make up the Organization for Economic Cooperation and Development.

Separately, Libya's National Oil Company on Monday lifted force major on oil production from the Al-Sharara field following a two-week disruption triggered by antigovernment protests. All operations at a 300,000 barrel-per-day (bpd) oil field were shut in Jan. 7 by protestors demanding fair access to fuel supplies and better road infrastructure.

Domestically, about 650,000 bpd of North Dakota oil production was shut in last week by frigid weather and heavy snowfall, disrupting operations in Bakken basin oil fields. Some 280,000 bpd of oil production remained shut in Sunday (1/21) afternoon, according to the North Dakota Oil and Gas Division, and it might take a month for the lost output to be brought back online. Before the disruption, North Dakota oil production averaged about 1.25 million bpd, with output reaching an all-time high of 1.52 million bpd before the COVID-19 pandemic in November 2019.

At settlement, international crude benchmark Brent for March delivery rallied $1.50 to $80.06 a barrel (bbl), with the next-month April futures narrowing its discount to the spot month contract to $0.46 bbl, reflecting growing concerns over tightness of available supplies on the global oil market. U.S. crude benchmark West Texas Intermediate for February delivery expired $1.78 higher at $75.19 bbl, with the March contract settling Monday's session $1.51 higher at $74.76 bbl.

NYMEX February RBOB futures spiked $0.0750 to $2.2378 gallon, and February ULSD futures added $0.0314 for a $2.6935 gallon settlement.

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