DTN Oil

WASHINGTON (DTN) -- Following a 2% advance at the start of the week, West Texas Intermediate (WTI) futures on the New York Mercantile Exchange (NYMEX) and Brent crude traded on the Intercontinental Exchange pulled back early Tuesday despite a fresh series of joint U.S. and U.K. strikes against Houthi targets in Yemen and a suspected drone attack against Russia's main Baltic Sea fuel terminal.

Poor weather conditions and the attack on the Ust-Luga fuel terminal have depressed Russian oil exports to a 1-1/2 month low 3.02 million bpd during the week-ended January 21, according to tanker-tracking data analyzed by Bloomberg. Russian crude oil exports have since resumed, but the repairs from the drone strike still could take weeks to be fully completed.

The commercial seaport Ust-Luga, located about 120 miles west of St. Petersburg, is a multifunctional port designed for the shipment of all types of cargo, oil, and petroleum products to international markets, and has both universal and specialized terminals. By 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 of stable gas into end products, including 4.2 million metric tons of light and heavy naphtha, 1 million metric tons of jet fuel and 1.5 million metric tons of fuel oil and gasoil. 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.

Separately, U.S. and U.K. military forces carried out a successful round of airstrikes against Houthi targets in Yemen, hitting an underground storage facility and Houthi missile and surveillance capabilities.

The strikes were "intended to disrupt and degrade the capabilities that the Houthis use to threaten global trade and the lives of innocent mariners." read the joint statement. Houthi rebels continue to assault commercial vessels passing through the Bab al-Mandab Strait, spiking up freight rates and forcing tankers to take a longer journey across the southern tip of Africa.

Combined with intensifying attacks on Russian energy infrastructure and shipping restrictions through the Panama Canal, tensions in the Red Sea stand to further support commodity prices and underlying inflation across developed and developing economies alike.

Near 7:30 a.m. EST, international crude benchmark Brent for March delivery retreated $0.69 to below $80 bbl at $79.36, with next-month April futures once again trading at a premium of $0.47 bbl. U.S. crude benchmark for March delivery declined $0.59 bbl to near $74.18 bbl. NYMEX February RBOB futures fell $0.0328 to $2.2050 gallon, and February ULSD futures dropped back $0.0167 to near $2.6768 gallon.

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