Oil prices jumped 5 per cent to over $121 a barrel on Wednesday as disruptions to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies.
The situation adds to market worries about the ripple effect of heavy sanctions on Russia, the world's second-largest crude exporter, after its invasion of Ukraine.
The CPC pipeline is a significant supply line for global markets, carrying around 1.2 million barrels per day of Kazakhstan's main crude grade, or 1.2 per cent of global demand.
Brent crude futures settled up $6.12, or 5.3 per cent, to $121.60, while U.S. West Texas Intermediate (WTI) crude futures rose $5.66, or 5.2 per cent, to $114.93 a barrel.
Oil benchmarks have been steadily rallying since Russia invaded Ukraine a month ago in what it calls a "special operation" and United States and its allies slapped heavy sanctions on that nation, disrupting worldwide oil trade.
Russia exports between 4 million and 5 million barrels of crude every day, making it the world's second-largest exporter behind Saudi Arabia. Analysts have varying estimates of how much oil will be unable to make it to market.
"There's a growing consensus that the de facto ban on Russian oil purchases has resulted in a supply disruption of 2 to 3 million barrels a day, and until the world can figure out how to replace that oil we're going to march on higher until demand destruction takes place," said Andrew Lipow, president of Lipow Oil Associates in Houston.
Crude oil exports from Kazakhstan's CPC terminal on Russia's Black Sea coast stopped fully on Wednesday after damage caused by a major storm and continued bad weather, a port ship agent and the head of CPC said.
Russian Deputy Prime Minister Alexander Novak later said that oil supplies by the CPC may be completely stopped for up to two months.
U.S. President Joe Biden is set to announce more Russian sanctions when he meets European leaders on Thursday in Brussels, including an emergency meeting of NATO.
European Union member countries remain split on whether to ban imports of Russian crude and oil products after both Canada and the United States said they would ban imports from Russia, and Britain said it would wind down such purchases.
"If there was an expectation that the war was dwindling it's not the case," said Claudio Galimberti, senior vice president of analysis at Rystad Energy. "You can expect further tightness in the markets."
U.S. crude stocks fell 2.5 million barrels last week, government data showed, compared with expectations for a modest increase. Crude production remained flat at 11.6 million barrels per day for the seventh straight week. Producers in the United States have been boosted drilling, but output has been slow to respond.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
