Oil prices briefly fell back from Thursday’s 10- and 14-year highs after International Atomic Energy Agency director-general Rafael Mariano Grossi said his trip to Tehran scheduled for Saturday (3/5) would pave the way for a new deal with Iran.
Meanwhile, refiners and traders in the European Union and United States continue to shun Russian oil exports in an act of “self-sanctioning” barrels out of the country involved in an aggressive, brutal assault against Ukraine that have now expanded to shelling of Europe’s largest nuclear plant in southeastern Ukraine. The Zaporizhzhia power plant has six reactors with each generating 950 megawatts and a total output of 5.7 MW.
Active combat at the site of nuclear power generation raised the alarm from Berlin to Washington, D.C. As of 5 a.m. ET, Ukrainian officials said Russians seized the facility, and the fire was extinguished. Grossi said at a news conference today, “there has not been a release of radioactive material and the integrity of the reactors has not been compromised,” but added that the situation remains “extremely tense and challenging.”
The accident highlights the growing number of risks to the country’s energy infrastructure, with shelling have been reported at fuel depots, refineries, and gas pipelines.
J.P. Morgan estimates that nearly 70% of Russian oil is currently struggling to find buyers, closing off around 2.5 million bpd of the country’s oil exports. Russia’s current oil production is around 11 million bpd of which around half is exports. Any material shortfall from Western sanctions imposed on production could not be quickly replaced by OPEC+ spare capacity. The list of companies fleeing Russia’s energy complex have now expanded to ExxonMobil, Chevron, Shell, and British Petroleum, as investors increasingly view Russian business as toxic. Russia is now under a severe sanction regime that sent its national currency, the ruble, in freefall, crushed its stock market and spiked inflation in a matter of days.
Further stoking concerns in an undersupplied global market, Libya’s largest oil field, El Sharara, with a production rate of 290,000 bpd halted operations on Thursday after an unknown group closed one of its main valves, according to a statement from Libya National Oil Corporation. The disruption can very well extend into next week and follows closure of Libya’s six oil terminals on the Mediterranean coastline due to bad weather and some protests.
Libya slipped into political turmoil once again this week after a newly appointed minister in one of Libya’s rival governments resigned, alleging a vote in the eastern city of Tobruk on Tuesday (3/1) that ushered in a new administration failed to include all of the country’s factions. Armed conflict could reignite amid a standoff between the rival governments in Libya, that risk resulting into a territorial division after the parliament in the east swore in a new administration while the United Nation’s recognized government in Tripoli refused to cede power.
Near 7:30 a.m. ET, NYMEX April West Texas Intermediate surged $2.63 to $110.27 bbl, and ICE Brent May contract advanced $2.15 to $112.64 bbl. NYMEX April RBOB futures rallied 5.85 cents to $3.3432 gallon, and April ULSD futures surged 6.21 cents or 1.8% to $3.5668 gallon.
Liubov Georges can be reached at liubov.georges@dtn.com
