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Supply Disruptions in Russia and Kazakhstan Provide Market Support
While bearish factors dominated, supply disruptions provided a degree of support to crude prices. A Ukrainian drone attack on Russia’s Caspian Pipeline Consortium (CPC) pumping station led to a 30-40% reduction in oil flows, potentially removing up to 380,000 barrels per day from the market. Although Kazakhstan managed record-high oil volumes despite this disruption, uncertainty lingered over the sustainability of such output.
In the U.S., harsh winter weather impacted production in North Dakota, with output declining by up to 150,000 barrels per day. These supply-side challenges helped to offset some of the bearish influence from rising inventories.
Geopolitical Uncertainty and Trade Policies Add Complexity
The market remained on edge as traders monitored potential changes to Russian sanctions. Ongoing diplomatic discussions between the U.S. and Russia in Saudi Arabia sparked speculation over possible sanctions relief, raising concerns about increased Russian oil supply returning to the market.
Adding to the market’s uncertainty, U.S. President Donald Trump’s proposal for significant tariffs on global industries introduced a potential headwind for global economic growth and energy demand. Analysts cautioned that these trade policies could negatively impact economic activity in Europe and China, two key regions for oil consumption.
Robust Demand in U.S. and China Offers Bullish Potential
Despite headwinds, the demand outlook remained supportive. Global oil consumption averaged 103.4 million barrels per day through February 19, representing a 1.4 million bpd increase, according to JPMorgan analysts. Increased industrial activity in China and colder weather in the U.S. could further boost demand.
Seasonal maintenance at U.S. refineries led to lower processing levels, but drawdowns in gasoline and distillate stocks contributed to a more balanced supply picture. Analysts also noted that diminishing hopes for a quick Russia-Ukraine peace deal helped revive buying interest in crude.
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