By Laila Kearney, Paul Carsten and Robert Harvey
NEW YORK (Reuters) -Oil prices rose more than $2 a barrel on Monday on news that crude production at Norway’s Johan Sverdrup oil field had been halted, adding to earlier gains from the escalation of the war between Russia and Ukraine .
futures settled at $73.30 a barrel, gaining $2.26, or 3.2%. U.S. West Texas Intermediate crude futures settled at $69.16 per barrel, up $2.14, or 3.2%.
Equinor said it had halted production at its Johan Sverdrup oil field, the largest in western Europe, due to an onshore power outage. Efforts are underway to restart production, an Equinor spokesperson said, but it was not immediately clear when it would resume.
Oil prices extended their gains on news of the outage, which signaled a possible tightening of the North Sea crude market, UBS analyst Giovanni Staunovo told Reuters. The physical supply of energy from the North Sea forms the basis of the Brent futures complex.
Kazakhstan’s largest oil field, Tengiz, operated by an American major Chevron (NYSE:), has cut oil production by 28%-30% due to ongoing repairs, further tightening global inventories. The repairs are expected to be completed by Saturday, the country’s energy ministry said.
Prices also rose as Russia’s war in Ukraine escalated over the weekend.
In a major reversal of Washington’s policy, President Joe Biden’s administration allowed Ukraine to use U.S.-made weapons to strike deep inside Russia, two U.S. officials and a source familiar with the decision said Sunday.
The Kremlin said on Monday that Russia would respond to what it called a reckless decision by the Biden administration, after previously warning that such a decision would increase the risk of a confrontation with the US-led NATO alliance.
“If Biden allows Ukraine to attack Russian forces around Kursk with long-range missiles, it could potentially bring back a geopolitical bid for the oil market as it represents an escalation of tensions there in response to North Korean forces entering the fray.” , said IG market analyst Tony Sycamore. .
There has been little impact on Russian oil exports so far, but oil prices could rise further as Ukraine focuses on more oil infrastructure, said Saul Kavonic, an energy analyst at MST Marquee.
Russia carried out the biggest airstrike on Ukraine in almost three months on Sunday, causing serious damage to the country’s electricity system.
Brent and WTI fell more than 3% last week on weak Chinese refinery data, and after the International Energy Agency forecast that global oil supply would exceed demand by more than 1 million barrels per day in 2025, even as OPEC+ production declines persist.
Traders began shifting WTI trades to the January contract ahead of the December contract’s expiration on Wednesday. The spread between the two contracts turned into a contango structure for the first time since February, with the later contract trading higher than the earlier month’s contract, meaning traders expected the price to rise.
“The turnover is going to be wild,” said Bob Yawger, director of Energy Futures at Mizuho (NYSE:).
