(Bloomberg) — Oil reversed an earlier decline as Russian shipments via the southern leg of a major pipeline to Europe were suspended.
Brent futures rose as much as 1.8% to trade near $98 a barrel, after earlier dropping by the same amount. US crude futures climbed as much as 2.1%. Russian network operator Transneft said Ukraine halted flows through the Druzhba pipeline toward Hungary, the Czech Republic and Slovakia on Aug. 4 as sanctions blocked payment of Moscow’s transit fee. That section of the link usually carries about 250,000 barrels a day, Transneft data show.
Read more: Russia oil flow halted through pipeline to Central Europe
Futures have been volatile in recent days amid thin summer trading volumes. The disruption to Russian oil supplies is a reminder of the risks to production in a market that’s been grappling with scant spare capacity. Yet prices also fell to the lowest since February last week on global economic growth concerns. Weakness in equity markets also limited oil’s gains.
“The market reaction tells you the fragility of the fundamentals remains acute,” said Harry Altham, an analyst at brokerage StoneX.
Flows via Druzhba’s northern leg, which supplies Germany and Poland, remain unaffected, Transneft said, adding that the company is working on alternative options for the transfer of funds.
Earlier in the day, prices fell as traders weighed the potential return of Iranian oil to the market. The US and Iran have just weeks to decide whether they want to revive their nuclear deal, after European Union diplomats presented parties with a final draft accord.
China’s imports of commodities in July offered some tentative signs of a demand recovery after the sharp slump earlier this year, but analysts said annual import levels are still depressed.
“Chinese crude oil imports are set to decrease for the second year in a row, resulting in the lowest annual import volume since 2018. For now, in other words, the days when China served as the engine of global oil demand are a thing of the past,” Carsten Fritsch an analyst at Commerzbank AG, said in a note. “And this will do nothing to ease concerns about demand on the oil market.”
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