Oil prices bounce on Russian pipeline restrictions and recession fears

A poster with crude oil written on the side of a storage tank in the Permian Basin in Menton, Loving County, Texas, United States, November 22, 2019. REUTERS/Angus Mordant

NEW YORK (Reuters) – Oil prices slowed on Tuesday, as fears of a slowing economy rivaled news that some oil exports had been suspended on the Druzhba pipeline from Russia to Europe that runs through Ukraine.

Crude oil prices have been under pressure for weeks as fears mounted that a recession could reduce demand for oil.

Brent crude lost 77 cents, or 0.8%, to $95.88 a barrel at 1:01 p.m. ET (1701 EST). US West Texas Intermediate crude fell 88 cents, or 1%, to $89.88 a barrel. Earlier in the session, both benchmarks rose more than $1 a barrel.

Russia’s pipeline monopoly Transneft said Ukraine had suspended the flow of oil through the pipeline because Western sanctions prevented a payment from Moscow from passing through for transit fees. This led to a price hike earlier in the session. Read more

Flows along the southern route of the Druzhba pipeline were affected while the northern route serving Poland and Germany was not interrupted.

“We don’t need it at this point, but it’s another reminder of how tight the market is and how sensitive the price is to supply disruptions, particularly from Russia,” said Craig Erlam of brokerage OANDA.

Prices have come under pressure from talks of a last-ditch effort by European countries to revive the Iran nuclear deal. On Monday, the European Union put forward a “final” text to revive the 2015 Iran deal. A senior EU official said a final decision on the proposal, which needs US and Iranian approval, was expected in “a very, very few weeks.”

Talks continued for months without agreement.

According to tanker trackers, Iran’s crude oil exports are at least 1 million barrels per day below their level in 2018 when former US President Donald Trump withdrew from the nuclear deal.

Oil is now down more than $40 from its peak in the wake of the Russian invasion of Ukraine, which briefly raised the price of Brent crude to $139 a barrel.

The latest round of weekly reports on US oil supplies is coming up, first from the American Petroleum Institute at 2030 GMT. Analysts are forecasting a slight 400,000 barrel drop in crude oil inventories.

Additional reporting by Alex Lawler, Sonali Paul and Emily Chow; Editing by Louise Heavens, Mark Potter, Barbara Lewis and David Gregorio

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