Oil Price Rise After Attack on Kazakhstan’s Key Oil Export Route

Oil prices rose on Tuesday following a Monday drone attack on an oil pipeline in southern Russia, which is the key export route for two-thirds of Kazakhstan’s crude.

As of 7:37 a.m. EST on Tuesday, the U.S. benchmark, WTI Crude, traded 0.72% higher at $71.26, while the international benchmark, Brent Crude, was up by 0.13% on the day.

In the past few days, the market was expecting the start of the U.S.-Russia talks in Saudi Arabia on a possible end to the war in Ukraine, and oil prices were falling amid expectations that a potential deal could result in a sanctions relief for Russia and its oil exports.

On Monday, the traders’ attention turned to the attack at a pumping station on a pipeline of the Caspian Pipeline Consortium (CPC), which operates the pipeline from the Caspian coast in northwest Kazakhstan to the Novorossiysk port on Russia’s Black Sea coast and carries most of Kazakh crude exports.

After the attack, the Kropotkinskaya pumping station was taken out of service, and crude transportation through the Tengiz-Novorossiysk pipeline system is being maintained at reduced flow rates, bypassing the attacked pumping station, the CPC consortium said.

The Tengiz-Novorossiysk pipeline transports more than two-thirds of all of Kazakhstan’s oil destined for export, as well as crude from some Russian oil fields.

Lowering the transit oil volumes

The damage to the CPC infrastructure would lower the transit oil volumes from Kazakhstan by around 30%, according to Russian oil pipeline operator Transneft quoted by Reuters. The reduced flows could last for up to two months until the damage is fixed, the Russian company said.

Still, the supply scare from Kazakhstan didn’t move oil prices too high—they were capped by the prospect of a peace deal for Ukraine and the expected return of Kurdistan’s oil exports as early as next month.