Oil prices edged up on Tuesday, extending the previous day’s rally driven by a halt in production at Norway’s Johan Sverdrup oilfield, though investors remained cautious amid fears of an escalation in the Russia-Ukraine war.
Brent crude futures for January delivery rose 15 cents, or 0.2%, to $73.45 a barrel by 0430 GMT, while U.S. West Texas Intermediate crude futures for December delivery were at $69.31 a barrel, up 15 cents, or 0.2%. The more active WTI January contract rose 13 cents, or 0.2%, to $69.30.
Both benchmarks climbed more than $2 a barrel on Monday after Norway’s Equinor said it has halted output from its Johan Sverdrup oilfield, Western Europe’s largest, due to an onshore power outage.
Work to restart production was under way, an Equinor spokesperson said, but it was not immediately clear when it would resume.
Additionally, Kazakhstan’s biggest oil field Tengiz, operated by U.S. major Chevron, has reduced oil output by 28% to 30% due to repairs, helping to further tighten global supplies. Repairs were expected to be completed by Saturday, the country’s energy ministry said.
“A halt of production at the 755,000 barrels per day Johan Sverdrup field in Norway due to a power outage, and a drop in production at the Tengiz field in Kazakhstan provided further upside,” said ING analysts in a note.
“In addition, geopolitical risks between Russia and Ukraine have increased after the U.S. said it would allow Ukraine to carry out long-range missile strikes on Russia.”
Russia had unleashed its largest airstrike on Ukraine in almost three months on Sunday, causing severe damage to the country’s power system.
In a significant reversal of Washington’s policy, President Joe Biden’s administration 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 Monday that Russia would respond to what it called a reckless decision by the Biden administration, having previously warned that such a decision would raise the risk of a confrontation with the U.S.-led NATO alliance.
Investors are wary, said Toshitaka Tazawa, an analyst at Fujitomi Securities, “assessing the direction of the Russia-Ukraine war after the weekend’s escalation.”
Meanwhile, traders began shifting WTI trades to the January contract ahead of the expiration of the December contract on Wednesday.
WTI flipped to contango for the first time since February on Monday, with January delivery trading at a premium to the December contract in a sign that supply tightness was easing.
(Reporting by Yuka Obayashi in Tokyo and Emily Chow in Singapore; Editing by Jacqueline Wong and Kim Coghill)