Oil prices rise on Sverdrup outage, Ukraine war escalation

Oil prices rose on news on Monday that output at Norway’s giant Johan Sverdrup oilfield has been halted, adding to earlier gains stemming from escalation in the Russia-Ukraine war. Brent crude futures were up $1.52, or 2.14%, to $72.56 a barrel while U.S. West Texas Intermediate crude futures were at $68.41 a barrel, up $1.39 cents, or 2.07%. Norway’s Equinor said it had halted output from its Johan Sverdrup oilfield, western Europe’s largest, due to an onshore power outage, without a clear timeline for its restart.
Oil prices rose on the news as the outage may tighten the North Sea crude market, UBS analyst Giovanni Staunovo told Reuters. Physical supply of crude oil from the North Sea underpins the Brent futures complex. Prices also rose on Monday as Russia’s war in Ukraine escalated over the weekend. In a significant reversal of Washington’s policy in the Ukraine-Russia conflict, President Joe Biden’s administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russia, two U.S. officials and a source familiar with the decision said on Sunday. The Kremlin said on that Russia would respond to what it called a reckless decision by Biden’s administration, having previously warned that such a decision would raise the risk of a confrontation with the U.S.-led NATO alliance.
“Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil as it is an escalation of tensions there, in response to North Korean troops entering the fray,” IG markets analyst Tony Sycamore said. There has been little impact on Russian oil exports so far, however oil prices could rise further if Ukraine targets more oil infrastructure, said Saul Kavonic, an energy analyst at MST Marquee. Russia unleashed its largest air strike on Ukraine in almost three months on Sunday, causing severe damage to the country’s power system. Brent and WTI fell more than 3% last week on weak data on China’s refinery run rates, and after the International Energy Agency forecast that global oil supply would exceed demand by more than 1 million barrels per day in 2025, even if output cuts remain in place from OPEC+.