Oil prices climbed more than $2 on Monday after crude production was halted in Norway, which added to the latest escalation of the Russia-Ukraine war.
Brent crude futures settled at $73.30 a barrel, gaining $2.26, or 3.2 per cent while the US West Texas Intermediate (WTI) crude futures settled at $69.16 a barrel, rising $2.14, or 3.2 per cent.
Norway’s Equinor halted output from its Johan Sverdrup oilfield, western Europe’s largest, due to an onshore power outage on Monday.
The outage was caused by smoke developing in an onshore electricity converter station which sends power to phase 1 of the Johan Sverdrup development. The situation was quickly clarified but resulted in a temporary shutdown of production on the whole Johan Sverdrup field.
Prices extended their gains on the outage news, which indicated a possible tightening of the North Sea crude market as the location adds to the Brent complex.
This added to supply worries as Kazakhstan’s biggest oil field Tengiz, operated by Chevron has reduced oil output by as much as 30 percent due to ongoing repairs. Repairs were expected to be complete by Saturday.
Prices also climbed on fresh geopolitical worries as Russia’s war in Ukraine escalated over the weekend after President Joe Biden’s administration allowed Ukraine to use US-made weapons to strike deep into Russia.
In response, Russia unleashed its largest airstrike on Ukraine in almost three months on Sunday, causing severe damage to the country’s power system.
The Russian government also said on Monday that Russia would respond to what it called a reckless decision by Biden’s administration, having previously warned that such a decision would raise the risk of a confrontation with the North Atlantic Treaty Organisation (NATO) alliance.
Market analysts noted that prices could rise further if Ukraine targets more oil infrastructure.
There is also the Chinese factor as weak data on China’s refinery run rates fell 4.6 per cent from last year, down from a year earlier for a seventh month, as plant closures offset the ramp-up of a newly started complex and demand from holiday travel.