Oil slips on Sverdrup field restart, geopolitical fears support

5:22 am Tuesday, November 19th, 2024

By Alex Lawler

LONDON (Reuters) -Oil slipped on Tuesday pressured by the restart of production at Norway’s Johan Sverdrup oilfield, although investor caution arising from fears of an escalation in the Russia-Ukraine war limited the decline.

Equinor has resumed partial production from the oilfield, Western Europe’s largest, following a power outage. An outage at the North Sea field helped prices to climb by over 3% on Monday.

Brent crude futures were down 45 cents, or 0.6%, to $72.85 a barrel by 0915 GMT, while U.S. West Texas Intermediate crude futures slipped by 46 cents, or 0.7%, to $68.70.

“I guess the partial restart of the Sverdrup field is the driver of the setback, as well a slightly stronger U.S. dollar,” said Giovanni Staunovo, analyst at UBS.

The U.S. dollar edged up on Tuesday to within striking distance of its one-year high. A strong dollar makes commodities like oil more expensive for other currency holders and tends to weigh on prices.

Another continuing outage provided support. Kazakhstan’s biggest oilfield, Tengiz, has reduced oil output by 28% to 30% for repairs whish are expected to be completed by Saturday, the country’s energy ministry said.

A rise in geopolitical tensions also supported prices.

In a significant reversal of policy, U.S. President Joe Biden’s administration allowed Ukraine to use U.S.-made weapons to strike deep into Russia, two U.S. officials and a source familiar with the decision said on Sunday.

The Kremlin said on Monday that Russia would respond to what it called a reckless decision by the Biden administration, having previously warned that such a decision would raise the risk of a confrontation with the U.S.-led NATO alliance.

Investors are wary, said Toshitaka Tazawa, an analyst at Fujitomi Securities, as they are “assessing the direction of the Russia-Ukraine war after the weekend’s escalation”.

While oil’s outright price has found support this week, the market structure has weakened. U.S. crude flipped to contango for the first time since February on Monday in a sign that supply tightness was easing.

(Additional reporting by Yuka Obayashi in Tokyo and Emily Chow in Singapore; editing by Jason Neely)