Ongoing uncertainties in oil supply continue to prop up the market, which is currently navigating a complex web of risks. These include disruptions to oil flows from Kazakhstan, the possibility of OPEC+ delaying planned production increases, weather-related issues in the US, and the ever-present threat of sanctions that looms over the market. Commodity analysts Warren Patterson and Ewa Manthey at ING highlight that these concerns collectively pushed the price of ICE Brent crude back above US$76 a barrel yesterday.

Buyers might be less willing to accept sanctioned Russian vessels

This week, the oil market is particularly focused on supply disruptions in North Dakota due to the exceptionally cold weather gripping the region. According to the North Dakota Pipeline Authority, oil production has already decreased by an estimated 120,000 to 150,000 barrels per day, and natural gas production is also experiencing setbacks. These disruptions are expected to persist until at least the weekend, when forecasts suggest warmer temperatures will finally arrive in the area.

Looking at sanctions, the European Union has recently agreed upon a new sanctions package targeting Russia. A key component of this package is aimed at Russian oil exports, specifically by sanctioning an additional 73 vessels identified as part of Russia’s “shadow fleet.” This follows a previous round where the EU had already sanctioned 79 vessels. Interestingly, while similar sanctions imposed by the US on Russia haven’t resulted in a major drop in overall export volumes, there has been a noticeable increase in oil being held in floating storage. This rise in floating storage is contributing to a growing reluctance among buyers to accept vessels that are under sanction.

However, potentially balancing out these supply risks is the anticipated restart of oil flows from Iraq’s Kurdistan region, which could be happening soon. There’s increasing chatter suggesting that these flows, which have been offline since early 2023, might resume in the near future. A resumption could inject a significant 300,000 barrels per day of supply back into the market. It’s worth remembering though, that we’ve heard similar rumors of an imminent restart before, so it remains to be seen. Adding another layer of complexity, it’s still unclear how Iraq would manage its OPEC+ production targets if these Kurdish oil flows were to actually come back online.