U.S. has asked Ukraine to stop drone strikes on Russian oil refineries – FT (NYSEARCA:USO)

The Biden administration has urged Ukraine to halt drone strikes on Russia’s energy infrastructure, warning the attacks risk provoking retaliation and driving up global oil prices, Financial Times reported on Friday.

The U.S. delivered repeated warnings to senior officials at Ukraine’s state security service and military intelligence directorate, according to the report.

The attacks have helped lift crude oil prices nearly 4% so far since March 12, when Ukraine ramped up its drone attacks on Russia’s refineries and other energy infrastructure.

The U.S. also is said to be concerned that Russia could retaliate by hitting energy infrastructure relied on by the West, such as the CPC pipeline carrying oil from Kazakhstan through Russia to the global market, which Russia shut briefly in 2022.

A Ukraine deputy prime minister said Friday that Russian oil refineries are legitimate targets for its forces.

Ukraine has shown it is capable of striking most oil infrastructure in western Russia, placing ~60% of the country’s oil exports at risk, experts told FT.

The U.S. complaints come as President Biden faces a tough re-election campaign this year with gasoline prices on the rise, jumping nearly 15% YTD to ~$3.50/gal.

Benchmark crude oil prices were little changed for the week: Front-month Nymex crude (CL1:COM) for May delivery closed -0.5% on Friday and flat for the week to $80.63/bbl, and front-month May Brent crude (CO1:COM) ended -0.4% on Friday and up 0.1% this week to $85.43/bbl.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)

Russia’s average daily oil refining rate fell to the lowest weekly level in 10 months after the flurry of Ukrainian drone attacks, Bloomberg reported.

Russian refiners processed 5.03M bbl/day of crude during March 14-20, according to the report, more than 400K bbl/day below the average for the first 13 days of the month, according to the report.

Citi analysts expect Russian oil production will increase in coming years despite Western sanctions, OPEC+ output cuts and downside risks from Ukrainian attacks on Russian oil infrastructure.

“We believe the market underestimates the ability of the Russian oil industry to defy pessimistic expectations and thrive,” Citi said this week in an analysis.

The energy sector, as indicated by the Energy Select Sector SPDR ETF (XLE), finished +0.8% for the week.

Top 10 gainers in energy and natural resources in the past 5 days: Aemetis (AMTX) +79.7%, Summit Midstream Partners (SMLP) +46.3%, Braskem (BAK) +26.7%, Meta Materials (MMAT) +23.3%, Empresa Distribuidora (EDN) +22%, Central Puerto (CEPU) +21.7%, CVR Partners (UAN) +19.2%, Greenfire Resources (GFR) +17.3%, Transportadora de Gas del Sur (TGS) +15.5%, NET Power (NPWR) +14.7%.

Top 5 decliners in energy and natural resources in the past 5 days: Nuscale Power (SMR) -45.8%, Hallador Energy (HNRG) -22.7%, Contango Ore (CTGO) -15%.

Source: Barchart.com