Oil prices climbed on Tuesday following a drone attack on an oil pipeline in southern Russia the previous day. This pipeline is a crucial export route for two-thirds of Kazakhstan’s crude oil.
By 7:37 a.m. EST on Tuesday, the U.S. benchmark, WTI Crude, rose 0.72% to $71.26, while the international benchmark, Brent Crude, increased by 0.13%.
In the days leading up to the attack, markets had been focused on upcoming U.S.-Russia talks in Saudi Arabia, which were seen as a potential step toward ending the war in Ukraine. This had led to a decline in oil prices, with expectations that a peace deal could lead to sanctions relief for Russia and boost its oil exports.
However, attention quickly shifted to the drone strike on the Caspian Pipeline Consortium (CPC) pipeline, which runs from Kazakhstan’s Caspian coast to Russia’s Novorossiysk port on the Black Sea. The pipeline handles the majority of Kazakhstan’s crude exports.
The attack caused the Kropotkinskaya pumping station to be taken offline, leading to reduced oil flow through the Tengiz-Novorossiysk pipeline. The CPC confirmed that oil transportation was still ongoing, but at lower flow rates, bypassing the damaged pumping station.
This pipeline carries more than two-thirds of Kazakhstan’s oil exports, as well as crude from some Russian oil fields. Damage to the CPC infrastructure is expected to reduce Kazakhstan’s oil transit by about 30%, according to Russian pipeline operator Transneft. The disruption could last up to two months until repairs are completed, Reuters reported.
Despite concerns over supply disruptions from Kazakhstan, oil prices did not see a dramatic surge. Prices remained relatively steady, weighed down by the prospect of a potential peace agreement for Ukraine and the anticipated return of oil exports from Kurdistan as soon as next month.
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