Oil prices end higher, buoyed by geopolitical tensions, Russia's output cuts

By Isabel Wang

Brent and WTI crude snap three-day losing streaks

Oil futures advanced on Monday as investors monitored escalating geopolitical tensions in the Middle East and Russia's war in Ukraine, while output cuts by Moscow to meet OPEC+ targets and a decline in the U.S. rig count raised concerns over a potential tightening of crude supply.

Price moves

West Texas Intermediate crude CL00 for May delivery CL.1 CLK24 rose $1.32, or 1.6%, to settle at $81.95 a barrel on the New York Mercantile Exchange. The contract snapped a three-session losing streak and scored its largest one-day dollar and percentage gain since March 18, according to Dow Jones Market Data. May Brent crude BRNK24, the global benchmark, was up $1.32, or 1.6%, to end at $86.75 a barrel on ICE Futures Europe. June Brent BRN00 BRNM24, the most actively traded contract, gained $1.25, or 1.5%, to finish at $86.08 a barrel.April gasoline RBJ24 rose less than 1 cent, or 0.3% to end at $2.7484 a gallon, while April heating oil HOJ24 advanced 2 cents, or nearly 1%, to settle at $2.6786 a gallon.Natural gas for April delivery GWMJ24 lost 4 cents, or 2.7%, ending at $1.6150 per million British thermal units. It was the largest one-day percentage decline since March 15, according to Dow Jones Market Data.

Market drivers

Oil futures rose on Monday, with U.S. crude settling right below the $82-a-barrel level after finishing last week with three consecutive sessions of declines.

The U.S. last week urged Ukraine to halt drone attacks on Russian energy infrastructure due to fears they would push up global oil prices and provoke retaliation, the Financial Times reported. Ukraine has denied that its attacks - which have been estimated to have knocked around 7% of Russia's refining capacity offline - risk alienating its allies in the conflict, Politico reported.

The Rosneft-owned Kuibyshev oil refinery in the Russian city of Samara halted one of its two primary refining units, knocking out half of its capacity following a drone attack over the weekend, two industry sources told Reuters in a report Monday.

The attack will knock off another 35,000 barrels per day (bpd) of Russian refinery capacity, bringing a total of roughly 400,000 bpd offline on top of normal maintenance, said StoneX's Kansas City energy team, led by Alex Hodes, in a Monday client note.

"This marks the eighth strike on Russian refineries in the last three weeks, which seems to be a campaign set out for Ukraine to destabilize the Russian energy sector," Hodes and his team wrote.

Also on Monday, Russia's government has ordered companies to rein in oil output in the second quarter to ensure they meet a production target of 9 million barrels per day by the end of June, in line with its pledges to OPEC+, according to Reuters.

Traders also kept an eye on developments in the Russia-Ukraine war after a terrorist attack on a concert hall outside Moscow by Islamic State gunmen on Friday night left more than 130 dead. Russian President Vladimir Putin has also attempted to link the attack to Ukraine - an allegation Kyiv has denied while accusing Putin of attempting to stoke fervor for Russia's invasion of the country, which is now in its third year.

"ICE Brent prices recovered to around $86/bbl this morning following a terrorist attack in Russia over the weekend. Meanwhile, continued drone attacks by Ukraine on Russian oil refineries keep the risk premium for the oil market higher," Ewa Manthey and Warren Patterson, strategists at ING, said in a note.

A falling U.S. rig count also raised concern over tighter crude-oil supply. Baker Hughes Co. last week reported that the number of active U.S. rigs drilling for oil fell by one, to 509, in the week ended Friday. The total active U.S. rig count, which includes those drilling for natural gas, declined by five, to stand at 624.

The U.S. rig count is now down by 134 rigs from last year's count of 758 - with oil rigs down by 84 and gas rigs down by 50, according to data compiled by Baker Hughes.

- Associated Press contributed.

-Isabel Wang

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03-25-24 1534ET

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