Key Points:
- Russian refinery shutdowns tighten oil supply.
- Strong Chinese demand and falling U.S. inventories support prices.
- Fed rate cut expectations and a weaker dollar boost oil demand.
Oil prices climbed on Monday as markets assessed the impact of Russian refinery shutdown, ongoing disruptions to crude flows, and signals from global demand. Expectations of additional restrictions on Russian exports added to concerns about future supply availability.
Brent crude futures settled 45 cents higher, up 0.67%, at $67.44 a barrel. U.S. West Texas Intermediate (WTI) crude rose 61 cents, or 0.97%, to $63.30 a barrel. Both benchmarks gained more than 1% in the prior week.
Refinery Shutdowns and Infrastructure Strikes Tighten Supply
A major Russian refinery in the northwestern town of Kirishi halted a key processing unit after a drone strike over the weekend, industry sources said. This Russian refinery shutdown affects about 355,000 barrels per day (bpd), equal to 6.4% of Russia’s refining capacity, creating concerns about reduced diesel output.
Ukraine has intensified attacks on energy infrastructure in recent weeks, including the Primorsk export terminal, which has the capacity to load around 1 million bpd. The shutdowns and disruptions highlight the vulnerability of refining and export operations, which remain critical to global supply.
“Behind the scenes, there are a lot of concerns around heavy oil and tight diesel supplies, keeping the market supported,” said Phil Flynn, senior analyst at Price Futures Group.
Market participants are also watching to see whether Western buyers introduce broader restrictions on Russian crude imports. Traders say expanded measures could further alter global oil trade flows and reinforce supply constraints.
Demand from China and U.S. Inventory Data Provide Support
In addition to supply concerns, oil prices received support from strong Chinese refinery demand in August and a decline in U.S. crude inventories. China’s imports remained firm, reflecting refiners’ efforts to meet domestic consumption and secure exports of refined products.
At the same time, official data indicated U.S. stockpiles fell last week, easing worries of oversupply and underpinning market sentiment.
Weaker Chinese economic data, however, capped price gains, signaling that slowing growth in the world’s second-largest economy could temper demand for fuel.
Investors Eye Federal Reserve Policy and Currency Moves
Attention is now shifting to the U.S. Federal Reserve’s policy meeting scheduled for September 16–17. Analysts widely expect interest rate cuts, which could stimulate consumption and increase fuel demand.
“The market is starting to price in maybe a more aggressive Fed cut, putting some downward pressure on the U.S. dollar and giving oil a boost,” Flynn noted.
On Monday, the dollar weakened against major currencies, making oil less expensive for holders of other currencies and supporting demand.
Outlook for Oil Markets
Analysts caution that volatility is likely to persist. While the Russian refinery shutdown and export disruptions are tightening supply, mixed economic data from major economies continue to cloud the demand outlook.
Ongoing supply disruptions and economic uncertainty remain the primary drivers of oil market movements, with traders balancing the risks of shortages against signals of slower growth.
Visit Oil Gas Energy Magazine to read more.
