NEW YORK: Oil edged up on Tuesday, reversing an early decline as worries about tightening supply were revived after Russia said oil exports to Europe on the southern leg of the Druzhba pipeline had been suspended since early August.
Russian pipeline monopoly Transneft said Ukraine had suspended oil flows via the pipeline leg because Western sanctions had prevented a payment from Moscow for transit fees from going through.
“Not that we 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 those from Russia,” said Craig Erlam of brokerage OANDA.
Brent crude was up $1.01, or 1.1 percent, to $97.66 a barrel at 11:30 a.m. EDT (1503 GMT), a sharp rebound from the session low of $94.90. US West Texas Intermediate crude gained 75 cents, or 0.8 percent, to $91.51 a barrel, bouncing from the session low of $89.05.
Oil also got a boost from a weaker US dollar. The dollar index, which measures the currency’s value against a basket of peers, was 0.23 percent lower at 106.09 at 10:25 a.m. ET (1425 GMT). Traders awaited a US inflation report on Wednesday.
Until the Druzhba news, mounting fears that a recession could cut oil demand had offset support for crude prices from tight supply and progress in talks to revive the Iran nuclear accord.
“Early selling had been prompted by a renewed prospect of Iranian nuclear discussions that could eventually facilitate resumption of oil exports out of Iran,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in a note, but added that he considered an imminent deal unlikely.