Oil Down as Druzhba Line Reopens, Struggles at $90s Despite Weekly Gain

By Barani Krishnan

Investing.com --  It lasted long enough on the oil market radar to help get U.S. crude back to above $90 per barrel and Brent briefly to $100, even delivering a weekly gain for both.

But as far as fleeting factors go, the temporary disruption of Russian oil flows through the Druzhba pipeline could only do much. 

West Texas Intermediate, the benchmark for U.S. crude, settled down $2.25, or 2.3%, at $92 per barrel, after a session peak at $94.81.

Brent, the London-traded global benchmark for crude, settled down $1.45, or 1.5%, at $98.15, after an intraday high at $100.08.

For the week, WTI was up 3.4%, offsetting some of last week’s 10% drop. Brent also gained 3.4% on the week, after last week’s 14% tumble.

The volatility in oil came after Ukraine's Naftogaz's JSC Ukrtransnafta, which controls distribution of the oil transiting the Druzhba pipeline, said earlier this week it had shut the passage for non-payment.

By late Thursday in Europe, Naftogaz said crude from Russia was flowing again on the system to customers in Hungary and Slovakia after it received payment for its service from Hungarian oil company MOL.

Also on Thursday, top U.S. Gulf of Mexico oil producer Shell (LON:RDSa) said it halted production at three deepwater platforms in the region. The three platforms are designed to produce up to 410,000 barrels of oil per day combined. But by Friday, crews were expected to replace a damaged part of the pipeline piece on the Gulf, Reuters reported.

Oil gained earlier in the week ​after t​he International Energy Agency — which is typically bearish on oil demand — said soaring international prices for natural gas could prompt more energy consumers to switch to oil for year-end heating purposes.

"Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries," the Paris-based IEA said in its monthly oil report. It raised its outlook for 2022 oil demand by 380,000 barrels per day.

Meanwhile, the Organization of the Petroleum Exporting Countries, which usually does all it can to push crude prices up, cut its 2022 forecast for growth in world oil demand. 

OPEC revised down its oil demand expectations by 260,000 barrels daily from its previous forecast for the year. The oil cartel has typically used lower demand as an excuse to cut production and boost prices.