ICE Brent settled almost 1.2% higher last week after a Friday rally following a Ukrainian attack on the Russian port of Novorossiysk. This led to a temporary suspension of oil exports from the port, which handles approximately 2.2m b/d of oil, including Kazakhstan crude from the Caspian Pipeline Consortium (CPC) terminal. However, reports that port operations resumed saw oil prices coming under pressure early today.
While the oil market is expected to remain in a large surplus through 2026, it is also facing growing supply risks. The scale and intensity of Ukrainian drone attacks on Russian energy infrastructure are picking up. In addition to Friday’s attack on Novorossiysk, Ukraine claimed responsibility for a strike overnight on Rosneft’s 170k b/d Novokuibyshevsk refinery.
Risks are also emerging elsewhere, with Iran seizing an oil tanker in the Gulf of Oman after it passed through the Strait of Hormuz. The Strait is a key choke point for the global oil market, with around 20m b/d passing through it.
The latest positioning data shows that speculators increased their net long in ICE Brent by 12,636 lots over the last reporting week to 164,867 lots as of last Tuesday. This was predominantly driven by short covering. It suggests that some participants are reluctant to be short at the moment amid supply risks related to uncertainty over sanctions.
Speculators also increased their net long in ICE gasoil over the last week amid growing concerns over tightness in the middle distillate market. Speculators purchased 11,797 lots, leaving them with a net long position of 98,286 lots. The impact of sanctions on Russian diesel exports, along with continued Ukrainian drone attacks on Russian refineries, means tightness concerns are unlikely to disappear anytime soon, particularly as we head deeper into winter.