Oil prices rise on Kazakhstan supply disruptions: is downside momentum fading for now?

Oil prices rose on Tuesday, following a drone attack on a Russian oil pipeline pumping station, which disrupted flows from Kazakhstan and added to gains from the prior session.

“The recent attack on the Caspian Pipeline pumping station has disrupted oil flows from Kazakhstan, raising concerns over potential shortages,” Muhammad Umair, analyst at FXempire, said. 

While the immediate impact of the disruption is limited, repeated attacks could escalate fears of long-term supply risks.

The recent drone strike targeting the Kropotkinskaya station in Russia’s southern Krasnodar region has significantly disrupted the flow of shipments from Kazakhstan to global markets. 

This disruption has particularly impacted Western energy firms such as Chevron and Exxon Mobil, which rely on the Caspian Pipeline Consortium (CPC) for transportation.

The CPC, which operates the pipeline, announced on Monday that the attack has led to a decrease in their ability to transport oil from Kazakhstan to key markets worldwide. 

This disruption could have far-reaching consequences for the global energy market, potentially leading to price fluctuations and supply shortages.

At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $71.48 a barrel, up 1.1%. Brent crude on the Intercontinental Exchange was at $75.44 per barrel, up 0.3% from the previous close. 

Upside remains limited in the long term

Even as prices rose on Tuesday, analysts believe that the upside potential in crude oil prices is limited in the longer term.

The Organization of the Petroleum Exporting Countries and its allies are scheduled to raise oil production in April.

On Monday, Russian Deputy Prime Minister Alexander Novak said that OPEC+ countries were not mulling delaying the planned supply increases from April. 

In December 2024, OPEC agreed to extend its voluntary production cuts of oil by 2.2 million barrels per day till the end of March. It was the latest extension by the group, after having extended the cuts multiple times last year.

The International Energy Agency expects an oversupply in 2025 as oil supply from non-OPEC countries is significantly higher than the expected growth in demand this year.

Though the Paris-based agency has lowered its view of the oversupply in the market this year, more supply from OPEC would be bearish for global prices.

Prices may get support from extended disruptions

However, some analysts said that an extended period of disruptions could prove bullish for oil prices in the coming weeks. 

“Crude seems to be building support around current levels. As far as front-month WTI is concerned, prices are finding a floor just north of $70 per barrel,” David Morrison, senior market analyst at Trade Nation, said. 

Trade sanctions imposed on Russia have resulted in a significant number of shipping vessels being unable to leave Russian ports, creating a bottleneck effect that has severely disrupted the flow of energy, particularly crude oil and natural gas, to Asiatic countries. 

This disruption has had a cascading effect on the energy security and economic stability of the region, leading to increased energy prices, shortages, and potential blackouts.

The sanctions have also impacted other sectors that rely on maritime trade with Russia, such as agriculture and manufacturing, further exacerbating the economic challenges faced by Asiatic nations.

“Global Crude Oil demand is also consistently underperforming forecasts, sparking some pumping agencies to slow up their production metrics,” Joshua Gibson, editor at FXstreet, said in a report. 

Is downside momentum fading for now?

“The daily MACD is flattening out which indicates that the downside momentum, which had been building since oil prices topped out in mid-January, is beginning to fade,” Morrison said. 

Could the bulls be preparing for another attempt to take back control?

The global oil market is currently facing a period of uncertainty due to the unpredictable nature of President Trump’s tariff threats. 

The potential imposition of tariffs on oil imports could have a significant impact on the supply and demand dynamics of the market, leading to price fluctuations and disruptions in trade flows. 

The current situation presents a potential for increased supply entering the market. This hinges on the possibility of peace talks being arranged between Ukraine and Russia. 

“Should these talks prove successful and result in a cessation of hostilities, the subsequent resolution of the conflict could lead to a surge in market supply,” Morrison added. 

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