Oil dropped as traders shrugged off the risk to commodity ships in the Black Sea until disruptions materialized.
West Texas Intermediate settled below $82 a barrel at the start of the week after rising more than 4% over the previous two sessions. In recent days, sea drones hit a Russian oil tanker and naval vessel, highlighting the threat to fuel flows on a key route to global markets. Still, exports are continuing from the region at a time when the market is relatively well supplied.
“The crude market has a poor record of anticipating the impacts of supply disruptions” and oil traders are “hesitant to make assumptions until supplies are off the market,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The fact that Saudi Arabia has plenty of spare capacity in the short term is also helping buffer any supply related reaction.”
With the elevated risks in the Black Sea doing little to propel prices, there were instead headwinds from wider markets on Monday. A selloff in government bonds accelerated, spurred by the threat of further rate hikes.
Meanwhile in central Europe, Poland has stopped shipping oil through a section of the Druzhba link running to Germany after detecting a leak late Saturday, according to pipeline operator PERN. The firm plans to resume pumping Tuesday morning.
Oil capped a sixth weekly gain last week, the longest rising streak since June 2022. Futures have erased year-to-date losses as supply cuts from Saudi Arabia and Russia tighten the market. On Saturday, the kingdom raised almost all of its prices for September to Asia and Europe.
Prices:
- WTI for September delivery fell 88 cents to settle at $81.94 a barrel in New York.
- Brent for October settlement dropped 90 cents to settle at $85.34.
