Oil prices rose more than a dollar a barrel on Tuesday (September 16th), as traders weighed the possibility of disruptions to Russian supplies from Ukrainian drone attacks on its ports and refineries, and awaited the Federal Reserve's decision on U.S. interest rates.

Brent crude futures closed up $1.03, or 1.5%, at $68.47 a barrel. U.S. West Texas Intermediate crude rose $1.22, or 1.9%, to $64.52 a barrel.

Transneft, Russia's oil pipeline monopoly, has warned producers it may have to cut production, opens new tab, following Ukrainian drone attacks on key export ports and refineries, according to three industry sources.

Ukraine has intensified attacks on Russian energy infrastructure in recent weeks, disrupting operations at Russia's main oil terminal in Primorsk last week as talks to end their conflict stalled. "Attacks on export terminals like Primorsk are more likely aimed at limiting Russia's ability to sell its oil abroad, which impacts export markets," said JP Morgan analysts.

"More importantly, these attacks demonstrate a growing willingness to disrupt international oil markets, potentially adding upward pressure on oil prices," they said.

Goldman Sachs estimates that the Ukraine attacks have reduced approximately 300,000 barrels per day of Russian refinery capacity in August and so far this month. US diesel futures were last up 2.5%, outpacing both WTI and US gasoline futures. The situation in Russia could lead to a tightening of the US diesel market, said StoneX Energy analyst Alex Hodes.

"If Russian refineries suffer substantial damage, it could increase demand for US diesel exports and potentially sustain the forward curve inversion," Hodes said. Investors are also concerned about the US Federal Reserve's September 16-17 meeting. The central bank is expected to cut interest rates, which would stimulate the economy and boost fuel demand. However, analysts remain cautious about the US economy.

The market is also considering the possibility of a decline in US crude oil inventories last week, with official data expected to be released on Wednesday at 14:30 GMT. A Reuters poll on Monday showed analysts expect US crude and gasoline inventories to have fallen last week, while distillate inventories are likely to have risen. (alg)

Source: Reuters